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Old 25th August 2012, 18:37   #421
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Default Re: Govt plans to impose additional levies on diesel cars

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Originally Posted by fiat_tarun View Post
Well, the diesel subsidy is anyway not meant for passenger vehicles, be it yellow board or private vehicles. The subsidy should be for the trucks that carry essential commodities & for the farmers.
How is a guy who can afford a >Rs. 15 Lakh/- truck and using it to gain enormous profits more entitled to subsidized fuel than a common man with a Rs. 6 Lakh/- car for personal use? Or are there any free/ subsidized truck operators? or farmers who give away their produce for free/ subsidy?

I agree that the subsidy is for people who do something for the govt. but not for any commercial enterprise.
There is a fear that deregulating diesel prices will increase inflation of essential commodities. However if additional levies on diesel cars will make your doctor, lawyer, accountant, employee, banker and anyone else who uses a diesel car to raise his charges. Does that not count as inflation?
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Old 25th August 2012, 20:34   #422
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Default Re: Govt plans to impose additional levies on diesel cars

^^ The truck guy will still make profits (enormous or not), with or without subsidised diesel. He might actually use this as a chance to increase his rates more than the the fuel price hike (% terms) ! The final people who will be affected will be all of us, but that is the reality today with oil prices fluctuating the way they are. If this does happen, the government will be forced to re-look at taxation on fuels...

Coming to people like Lawyers, doctors, etc charging extra, they can already be doing the same driving their petrol cars today.

The point i'm trying to make is that for a free market and for growth in the long term, diesel will have to be de-regulated. How it will be done is the BIG question. Dual pricing will not work, a levy on diesel cars is a very regressive step and very short term. The best solution would be to hike prices in phases and work out a direct subsidy scheme for the sectors that the government thinks need it.

All this money that the government is spending as a diesel subsidy could actually be used (scams aside) to better our transport infrastructure, which is what is actually required.

Last edited by fiat_tarun : 25th August 2012 at 20:41.
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Old 26th August 2012, 02:47   #423
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Default Re: Govt plans to impose additional levies on diesel cars

If the Government keeps this stupid pricing difference between petrol and diesel, I will pay even 2.5 Lakh Extra duty on a car and still buy a diesel car.

Who knows today's difference of 30 odd rs might become 100rs tommorrow due to this same stupid pricing
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Old 26th August 2012, 09:38   #424
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Default Re: Govt plans to impose additional levies on diesel cars

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Originally Posted by wildsdi5530 View Post
How is a guy who can afford a >Rs. 15 Lakh/- truck and using it to gain enormous profits more entitled to subsidized fuel than a common man with a Rs. 6 Lakh/- car for personal use? Or are there any free/ subsidized truck operators? or farmers who give away their produce for free/ subsidy?
First, I am against subsidy. Now to answer your question - to keep transportation cost of essential goods low. Because, as much as we like to think we are a mixed economy, everyone in the supply chain behaves like a capitalist and passes on additional costs to the customer.
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Old 26th August 2012, 20:17   #425
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Default Re: Govt plans to impose additional levies on diesel cars

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Well, the diesel subsidy is anyway not meant for passenger vehicles, be it yellow board or private vehicles. The subsidy should be for the trucks that carry essential commodities & for the farmers.
Well then why all State Road Transport corporations buy subsidized diesel? Why do all municipal corporations, power corporations, ministries and all government departments have diesel jeeps and cars running on subsidized fuel?
If it pertians to government then subsidy seems ok, if common car owner starts using the same, it is a crime.
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Old 27th August 2012, 10:55   #426
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Default Re: Govt plans to impose additional levies on diesel cars

The entire reason why Indian currency is heading for a toss is because of the HUGE crude import bills that we are footing, and paying using the dollars.

WHY?

Because in spite of scarcity of crude oil, our public has no plans of cutting down the consumption. In the normal course of economics, scarce items become expensive and public cuts down the consumption.

However, because of this artificial pricing, such a stage never occurs in India.
End result? We can see what is happening to the balance of payments (import/export) and the foreign exchange rates.

In long term this means that goods and services produced in India will become less and less valuable globally.

Soon govt will resort to US philosophy of increasing public debt to finance the running costs - which is absolutely a bad philosophy - a long term debt should be solely used to finance long term capital assets and not the working capital of a company (or a country).

Economic Doomsday we welcome you!
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Old 27th August 2012, 11:04   #427
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Default Re: Govt plans to impose additional levies on diesel cars

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The entire reason why Indian currency is heading for a toss is because of the HUGE crude import bills that we are footing, and paying using the dollars.

WHY?

Because in spite of scarcity of crude oil, our public has no plans of cutting down the consumption. In the normal course of economics, scarce items become expensive and public cuts down the consumption.

However, because of this artificial pricing, such a stage never occurs in India.
End result? We can see what is happening to the balance of payments (import/export) and the foreign exchange rates.
Ok.

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Originally Posted by alpha1 View Post
In long term this means that goods and services produced in India will become less and less valuable globally.
Why does this follow from whatever you have written above?

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Soon govt will resort to US philosophy of increasing public debt to finance the running costs
We already do. All the oil subsidies come from public debt.

Last edited by carboy : 27th August 2012 at 11:06.
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Old 27th August 2012, 11:57   #428
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Default Re: Govt plans to impose additional levies on diesel cars

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Because in spite of scarcity of crude oil, our public has no plans of cutting down the consumption. In the normal course of economics, scarce items become expensive and public cuts down the consumption.

However, because of this artificial pricing, such a stage never occurs in India.
I don't think it is that simple. Normally when supply constricts, this drives prices up which reduced demand. However, there are some things that are essentials, and demand for those items will never fall below a threshold, regardless of price. For example, no matter how high the price of food rises, people cannot reduce their consumption beyond a point, simply because they need to eat. Similarly for transport. With good public transport, people might drive less and reduce their consumption of oil. But right now those public transport options mostly do not exist.

And this dilemma exists for most of the world, other than the oil exporting countries of the gulf.
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Old 27th August 2012, 12:01   #429
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Default Re: Govt plans to impose additional levies on diesel cars

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Originally Posted by carboy View Post
Ok.



Why does this follow from whatever you have written above?



We already do. All the oil subsidies come from public debt.
... And what does the foreign exchange rates signify?
Rather, to put it in another words, why is 1 USD = 55 INR. Why was 1 USD = 45 INR one/two years back?

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Originally Posted by johnjacob View Post
I don't think it is that simple. Normally when supply constricts, this drives prices up which reduced demand. However, there are some things that are essentials, and demand for those items will never fall below a threshold, regardless of price. For example, no matter how high the price of food rises, people cannot reduce their consumption beyond a point, simply because they need to eat. Similarly for transport. With good public transport, people might drive less and reduce their consumption of oil. But right now those public transport options mostly do not exist.

And this dilemma exists for most of the world, other than the oil exporting countries of the gulf.
Correct, there is a price in elasticity for such items. As you have rightly pointed out about the food.
However, publicly available diesel has been artificially named as "essential" in India.
Is there any other country you know where it is so?

Last edited by alpha1 : 27th August 2012 at 12:06.
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Old 27th August 2012, 12:44   #430
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Default Re: Govt plans to impose additional levies on diesel cars

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...
Correct, there is a price in elasticity for such items. As you have rightly pointed out about the food.
However, publicly available diesel has been artificially named as "essential" in India.
Is there any other country you know where it is so?
Diesel is essential commodity in India because it drives two prime movers of our economy namely agriculture and transport. If we free price diesel, we will have uncontrolled and unregulated inflation almost the kind seen in Zimbabwe.
The real dilemma is: how to maintain diesel as a essential commodity and yet prevent private transport from over utilizing it.

I believe if this government is serious about controlling ever spiraling fuel subsidy bills, it must firstly prevent Indian railways, all state transport corporations and all municipal and state vehicles from using up subsidized diesel. Since all these are government bodies, It will be easy to control their diesel usage, simple laws enacted to make each such vehicle use either electricity (esp railways) or cng should suffice. This alone should almost halve the diesel usage in India.

Due to the government push, once sufficient CNG and alternate fuel resources are available and distribution setup is completed, common people can be tempted to move to CNG/alternate fuels by means of cheap conversion kits/one time green subsidy etc. If the government is serious, by effective steps within 5 years we can get rid of the oil monster.
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Old 27th August 2012, 14:35   #431
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Default Re: Govt plans to impose additional levies on diesel cars

Folks,
Do not think the transport sector is misusing/abusing diesel. The real problem lies elsewhere, diesel is used in variety of industries these days. We have Telecom Sectors using diesel to run their signal stations and making a big killing out of it. Entertainment sector using it for their late night jigs, construction industry. How do we realistically put a cap on such uses where diesel is exploited for commercial purposes.

This is where all governments irrespective of party affiliations will be finding it hard to chew.
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Old 27th August 2012, 14:42   #432
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Default Re: Govt plans to impose additional levies on diesel cars

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Diesel is essential commodity in India because it drives two prime movers of our economy namely agriculture and transport. If we free price diesel, we will have uncontrolled and unregulated inflation almost the kind seen in Zimbabwe.
The real dilemma is: how to maintain diesel as a essential commodity and yet prevent private transport from over utilizing it.

I believe if this government is serious about controlling ever spiraling fuel subsidy bills, it must firstly prevent Indian railways, all state transport corporations and all municipal and state vehicles from using up subsidized diesel. Since all these are government bodies, It will be easy to control their diesel usage, simple laws enacted to make each such vehicle use either electricity (esp railways) or cng should suffice. This alone should almost halve the diesel usage in India.

Due to the government push, once sufficient CNG and alternate fuel resources are available and distribution setup is completed, common people can be tempted to move to CNG/alternate fuels by means of cheap conversion kits/one time green subsidy etc. If the government is serious, by effective steps within 5 years we can get rid of the oil monster.
I think changing Indian railways to use electricity is next to impossible. First, it requires huge amounts of electricity which we dont have. second, it requires a massive replacement of engines for which we dont have the money! Same with Government transports. Unless centre compensates them for changing, the state govts(esp the BJP ones) will not change to CNG. What about the buses procured from Volvo? Again, Huge costs in procuring them, cant really let them rot can we! So, as you mentioned, 5 years is too less a time to get it done even in 1 state let alone one country! So, the only option available to the govt will be to pass the cost on to the consumers and well, the current govt is all about vote bank politics(and about appeasing one Bengali lady! ) and they would rather lead the country to ruin if it means another 5 years at the helm than do something about it!
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Old 27th August 2012, 14:46   #433
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Default Re: Govt plans to impose additional levies on diesel cars

This means that for political reasons they are unable to reduce the so called subsidies from Diesel. Even if the excise is hiked it will not affect the millions of diesel vehicles already there. One can safely assume that then Kerosene, and LPG subsidies (there are truly that) are here for the long run.

The economic repercussion will be enormous. Our economy will go to a huge toss.
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Old 27th August 2012, 15:27   #434
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Default Re: Govt plans to impose additional levies on diesel cars

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I think changing Indian railways to use electricity is next to impossible. First, it requires huge amounts of electricity which we dont have. second, it requires a massive replacement of engines for which we dont have the money! Same with Government transports. Unless centre compensates them for changing, the state govts(esp the BJP ones) will not change to CNG. What about the buses procured from Volvo? Again, Huge costs in procuring them, cant really let them rot can we! So, as you mentioned, 5 years is too less a time to get it done even in 1 state let alone one country! So, the only option available to the govt will be to pass the cost on to the consumers and well, the current govt is all about vote bank politics(and about appeasing one Bengali lady! ) and they would rather lead the country to ruin if it means another 5 years at the helm than do something about it!
I agree to some part of what you said. However gross mismanagement and inefficiencies can and should be stopped. Why are diesel locomotives running entire route (mumbai-jaipur for example) under electric wires? Why are locos not changed over from diesel to electric everywhere electric traction is available? Reason Mr Lalu Yadav in his cookbook economics decided to dieselize everything to have uniform costs and apparent savings.

Babus driving diesel cars, sorry that is inexcusable. Especially driving old battered jeeps and diesel ambassadors giving 3 km/liter. Mumbai BEST is running on CNG, why is Maharashtra MSRTC not running on CNG? BEST didn't buy Volvos because they didn't provide CNG buses, if all transport corporations did the same, sorry volvo would have CNG buses right tomorrow.
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Old 30th August 2012, 21:15   #435
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Default Re: Govt plans to impose additional levies on diesel cars

Came across this article in Business World.

http://www.businessworld.in/en/story...99458.0/page/0

Quote:
The biggest controversy is with diesel. With petrol costing about 42 per cent more, the use of diesel has shot up to 44 per cent of total fuel consumption compared to 35 per cent a decade ago. The view that owners of fancy diesel-powered cars and SUVs and rich farmers powering their gensets do not deserve these high subsidies is gaining momentum. The Economic Survey 2012 suggests both ‘adjustment’ similar to China, as well as ‘high road tax and vehicle taxes’. However, Praful Patel, heavy industries minister, aligned himself with automakers and opposed any diesel ‘price adjustment’ formula.

For now, a consensus is unlikely.
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