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Old 4th October 2011, 19:10   #91
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Default Re: Petroleum Pricing in India ? Debate

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Originally Posted by zulfi hansi View Post
It would have been very simple if our Govt. would have adopted the policy of Brazil where no passenger car can have a diesel engine, only petrol as they have a ethanol blend which works like charm, they are a major sugar cane producer and so are we (just that they produce enough for cars and alcohol too, where as we consume all the molasses only for alcohol), that said even we can adopt this system and offset the expensive import of oil to some extent. What say Guys.
This is factually incorrect as brazil prohibits import of diesel cars but produces and exports diesel cars . As a country they actively encourage bio-diesel and ethanol blending . While ethanol mixing is great for us but I believe that taking it to brazil's level is infeasible for India because of the following :-
1. In Brazil the whole sugarcane is used to make ethanol and not just the bagasse - if that happens in India sugar prices would shoot up and since we are the world's largest consumer of sugar that would lead to another problem.
2. If Sugarcane starts substituting the foodgrain crops we are going to have shortage of foodgrains - we have many more mouth to feed and much less cultivable land and even lesser irrigated land ( sugarcane crops need lots of water )

Last edited by souravc : 4th October 2011 at 19:12.
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Old 4th October 2011, 20:25   #92
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Default Re: Petroleum Pricing in India ? Debate

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This is factually incorrect as brazil prohibits import of diesel cars but produces and exports diesel cars . As a country they actively encourage bio-diesel and ethanol blending . While ethanol mixing is great for us but I believe that taking it to brazil's level is infeasible for India because of the following :-
1. In Brazil the whole sugarcane is used to make ethanol and not just the bagasse - if that happens in India sugar prices would shoot up and since we are the world's largest consumer of sugar that would lead to another problem.
I may have been wrong on diesel cars since this info is more than 5 yrs old, then bio-diesel was not tested commercially for cars. This is an old news which I verified;

It's Not Just Here, Brazil Outlaws Diesels

Emission Standards: Brazil: On-Road Vehicles and Engines

But Renault has just launched Duster in Brazil and has not given option of a diesel engine, whereas all other markets where Duster is sold has a diesel option.

Otherwise on your first point the fact is that Brazil is actually the largest producer of sugar in the world, that wouldn't be possible if they used all the sugar cane only for ethanol (which actually they cannot). See this;

Worlds Top 10 Sugar Producing Countries - 2011 | SUGAR INDUSTRY

Moreover both sugar and ethanol (molasses) are produced together inevitably, molasses (from which ethanol is made) is a byproduct of sugar manufacturing, I thought you should know this.
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Old 4th October 2011, 23:19   #93
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Default Re: Petroleum Pricing in India ? Debate

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tax car owners more than the truck owners?? They cant do too much on the initial prices as it would lead to a different issue altogether?? Any views on this?
car owners already pay a lot more than truck owners(in terms of percentage of tax on diesel engines to the cost of vehicle. But yes it is an a viable alternative to increase taxes on diesel engines to offset the price difference. Further the tax exemption given to engines below 1.2L should be removed or atleast reduced. However the latest generation of diesel engines are far more efficient than petrol engines and hence have a very strong case for their use.
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Otherwise on your first point the fact is that Brazil is actually the largest producer of sugar in the world, that wouldn't be possible if they used all the sugar cane only for ethanol (which actually they cannot).

Moreover both sugar and ethanol (molasses) are produced together inevitably, molasses (from which ethanol is made) is a byproduct of sugar manufacturing, I thought you should know this.
Bio-fuels have been an alternative for many years now and will become even more attractive as the prices of traditional fuels increase. It is a simple case of customer choosing the least expensive option(and the market providing for it). But i doubt OPEC or our own government would let it happen. It is a short term fix because
1. The only option is to blend(which would not affect the prices by much) the diesel as having a higher concentration of bio-diesel would result in high pressure on the land usage. We may be a big country, but we are also a very densely populated nation. the average land holding is very very low. the forest lands are already facing pressure from human expansion and wastelands are not big enough to cater to need of the entire country. Bio-diesel in its present form is not as efficient as needed to fuel the hunger of this nation without sacrificing on other needs(most importantly food production). The effects were evident when US farmers started producing corn(George W Bush, term 2) for ethanol production and it lead to increase in prices of food items of all types across the globe.
2. To have a substantial reduction in costs, sugarcane production will have to increase several-fold, not to mention the pressure this particular crop has on nutrients in the soil and (as mentioned before) the water table of the soil in a country where the water table has fallen to dangerously low levels.
3. Brazil may be one of the largest growers of sugarcane and may have a good policy on ethanol & bio-diesel, it may be one of the fastest growing economies in the world, but it is still responsible and has been criticized for severely ruining the natural ecosystem of the area. thousands of acres of land has seen the removal of forests and natural habitat to replace the needs of humans. Brazil has that luxury, but do we?
4. It is inevitable that we would see(in our lifetime) a major shift in the way cars are run. Alternative/Eco-friendly fuels will be developed. Bio-diesel/Ethanol/Electric cars/Hydrogen right now are not viable but one of them or a new one will become in a few decades. We have entered a phase where the primary source AKA petroleum products are nearing the end, and as the crunch increases, so would the pressure on our wallets.
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Old 5th October 2011, 02:01   #94
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Default Re: Petroleum Pricing in India ? Debate

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But Renault has just launched Duster in Brazil and has not given option of a diesel engine, whereas all other markets where Duster is sold has a diesel option.
Is Duster being manufactured in Brazil or being imported ? Imported diesels are not allowed

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Originally Posted by zulfi hansi View Post
Otherwise on your first point the fact is that Brazil is actually the largest producer of sugar in the world, that wouldn't be possible if they used all the sugar cane only for ethanol (which actually they cannot).
I guess you misunderstood, i didn't mean that they use the whole sugarcane production for producing ethanol - i meant that when they decide to produce ethanol , they use the whole cane rather than the bagasse as they use in India . Hope you understand the meaning of Bagasse. In Brazil they have flexible production units which can swing production to sugar or ethanol completely depending on the global prices . India's sugar and related product market is a controlled market.

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Originally Posted by zulfi hansi View Post
Moreover both sugar and ethanol (molasses) are produced together inevitably, molasses (from which ethanol is made) is a byproduct of sugar manufacturing, I thought you should know this.
Refer above , in Brazil the whole cane is used to make ethanol when its prices are good rather than the bagasse like in India . To keep the discussion short , Brazil is a flexible market with much less control on sugar and ethanol so that companies are free to decide which one to produce when - in India , due to government's direct and indirect control the flexibility is not there .
Well , I know it better than most since one of my prime responsibility is to manage on behalf of my bank a multi million dollar risk that we run across India and Brazil units of one of the largest sugar companies in the world . So this topic is home ground for me !!
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Old 5th October 2011, 16:11   #95
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Default Re: Petroleum Pricing in India ? Debate

I find the whole subsidy scheme clumsy. Whats the point in taxing so high and then giving subsidy. Rather keep the base fuel rate in correlation with world market and then adjust the taxation accordingly to regulate the retail price.

Government takes in huge revenue and pays subsidy to oil companies. And in the end only the subsidy is highlighted as revenue loss to justify price rise. They dont show year on year increase in revenue because of increased fuel consumption.

The common excuse for the increase in fuel price is mentioned as the difference in world market price and our cost. So what happens in effect is that the Rs 3 subsidy cut eventually translates to Rs5 in retail price. If the subsidy cost is the only issue then they should adjust such that the retail price increase is equal to the subsidy cut. By their logic they dont do it for tax revenue, then they should not take the increased tax revenue.
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