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Old 8th November 2011, 09:14   #76
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

@Hellmet; the decent middle class family is not the common man. He is the minoroty who just happens to make a lot of noise. 77% of Indians live on less than 20 a day. That is the real common man. The govt. has to tax the decent middle class man to pay for the rich and the poor.
@phamilyman; OMC are pblicly traded companies responsible to their share holders. If they are going bankrupt because of mismanagement, would there be such a hue and cry? Just because of govt. pressure to control prices even after de-regulation, they are suffering loss which is their problem and their share holders.
I don't know how many people protest when maruthi raises the cost of its cars. Or when due to strikes the company was at a loss.
Mamatha should have protested against the Maruthi strike.
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Old 8th November 2011, 09:24   #77
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by Mik View Post
If you are interested, go out and check the benefits of NREGA and how it has changed the social fabric in the places it has been used effectively.
This is , however since you mentioned my reply.

NREGA is used properly only for 10% , balance everything is taken by local contractor affiliated to MLA , MLC and party . I have seen this in close quarter hence the comment . People are paid only 1/3 the amount , that to for not even half day work and if you u happen to see the the payment list , people as old as 70-80 yrs are also in the list .


If actually the project has been implemented in letter & spirit , we would have seen many small irrigation canal's / waterbodies / roads/ wastelands developed . But ground reality is different .

IMHO this scheme is only to benefit the political class.

P.s: My inlaws & close relatives are MRO / tashildar ,hence my comment .
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Old 8th November 2011, 09:27   #78
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Wow! What a revealing thread!

...And all the Sheikhs who own a fortune are content by selling just crude oil. Imagine if they started selling finished products instead of crude? How much more they'd make and the minuscule margin they'd leave for the Co's and Inc's?


Last edited by inreverse : 8th November 2011 at 09:29.
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Old 8th November 2011, 09:39   #79
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

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Originally Posted by phamilyman View Post
Very well said. all the businessmen who dont pay tax (versus honest non-tax-frauding salaried folk like us) and then run their diesel SUVs with cheap fuel should pay for the fuel they are guzzling - not via my taxes paying for oil bonds.
Sorry to go , but it seems you are implying that in general all businessmen do not pay taxes and more often than not salaried people do.

If so I would like to disabuse you of this notion. I know enough struggling businessmen, modestly successful business people and wildly successful business people who pay their tax on even Rs 1000 of cash income. At the same time I also know salaried and ex-salaried folks who willfully do not disclose their rental income of a let-out property and under disclose or do not disclose their capital gains from selling any asset. I am an honest tax paying businessman and I felt slighted when I read the above. So please....

Cheers,
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Old 8th November 2011, 09:39   #80
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

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Originally Posted by wildsdi5530 View Post
The affluent people who own bikes and cars should not allow the poor to suffer. BPL calsses with less than Rs.20/- per day. Just imagine that everytime you buy a litre of petrol you are spending the equivalent of what a common man spends in 4 days.
Shame on us all.
Car owners may reasonably be presumed as well off - including Nano/Alto owners - but calling bike owners wealthy is stretching things a bit. Everyone owns one and a cell phone. The neighborhood electrician, plumber, carpenter and mason included! Their livelihood depends on it! The price rise will pinch them the most, but it is still inevitable. And naturally, everyone who utilises their service will pay for it when these guys hike their service charges.
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Old 8th November 2011, 09:58   #81
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I guess the price increase has more to do than just the Oil marketing companies. Government charges an ad valorem tax on petro products. So if the prices go up, government gets free money to cover up for its stupidity and financial mismanagement.

Quote:
Originally Posted by wildsdi5530 View Post
@Hellmet; the decent middle class family is not the common man. He is the minoroty who just happens to make a lot of noise. 77% of Indians live on less than 20 a day. That is the real common man. The govt. has to tax the decent middle class man to pay for the rich and the poor.
I agree. However the problems of the poor are completely different and dont even come to public fora. As far as I have seen from the local service population, the main problem why women from poor families come to household work is mainly because of their husbands wasting money on alcohol, while people at home sleep without food. Government is not bothered about them, because it generates huge revenues from alcohol.
Sorry for being way off topic.

Sorry I am not able to merge this with my previous post. Mods please merge.Sorry for successive posts

Last edited by Technocrat : 8th November 2011 at 22:55.
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Old 8th November 2011, 10:54   #82
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by wildsdi5530 View Post
@Hellmet; the decent middle class family is not the common man. He is the minoroty who just happens to make a lot of noise. 77% of Indians live on less than 20 a day. That is the real common man. The govt. has to tax the decent middle class man to pay for the rich and the poor.
@phamilyman; OMC are pblicly traded companies responsible to their share holders. If they are going bankrupt because of mismanagement, would there be such a hue and cry? Just because of govt. pressure to control prices even after de-regulation, they are suffering loss which is their problem and their share holders.
You hit the nail on the head.

You see their financials and tell me - look at their loans/share prices/valuations. These companies have suffered.

btw even srilanka has a similar logic: Sri Lanka state petroleum utility makes more losses - LANKA BUSINESS ONLINE and there our Lanka IOC suffers even more losses!
Quote:
Originally Posted by diffsoft View Post
Sorry to go , but it seems you are implying that in general all businessmen do not pay taxes and more often than not salaried people do.

If so I would like to disabuse you of this notion. I know enough struggling businessmen, modestly successful business people and wildly successful business people who pay their tax on even Rs 1000 of cash income. At the same time I also know salaried and ex-salaried folks who willfully do not disclose their rental income of a let-out property and under disclose or do not disclose their capital gains from selling any asset. I am an honest tax paying businessman and I felt slighted when I read the above. So please....

Cheers,
Ah yes, due apologies. I am certainly not referring to the microscopic minority of businessmen who pay taxes. Again, those with established proper business concerns do pay - here its the proprietorships i'm referring.

and yes, I agree about the salaried class doing lakhs of fraud in their income taxes as well. The point really is that there are so many people out there who just don't pay any tax, ever (or only a miniscule fraction):
- The five property dealers I've interacted with in the last 4 years for purchases or rentals for myself/relatives. No one was interested in anything except cash!!
- The mega shop I bought furniture from ("if you want a proper bill, the price is higher for my outgo and then add VAT - but then there's hardly any warranty in these items - so what will u do with a bill?")
- The sundry contractor (said i cant charge on tax, if you pay tax, then my income will come under scanner - now i just show 1.2L as my annual income. his current income runs into a handful of cr in my opinion)
The list is endless. Of course, we salaried folks, who're fed up of paying taxes and getting the urban mess called gurgaon are equally to blame. We brought it on ourselves. Its a vicious cycle overall, no doubt.

Again, my grouse was for tax paying for oil bonds to subsidize diesel for SUVs driven by some of the fellows listed above! They are the stereotypes that pain me about cheap diesel.
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Old 8th November 2011, 11:08   #83
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Nice analysis phamilyman. This thread should have been shut down, but nobody seems interested in letting go the favourite whipping boy of the country, the government. Taking inspiration a tweet by junior Bachchan, the guy who has a solution to all the problems, are sitting at home in front of a computer and typing away.
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Old 8th November 2011, 11:20   #84
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

An excellent analysis and thread; In USA, fuel/energy is taxed less since it leads to high cost economy (the one we have created), due to its cascading effects. There is complete lack of transparency in pricing, all the oil mafia (which can burn a deputy commissioner), corruption/pilferage will all factored in final price.
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Old 8th November 2011, 11:24   #85
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

I would request the mods to please close this thread as I think it has served its purpose. Because had it not been for my flawed analysis, the facts would have never been discussed. I will surely be back with v2.0 of my different approach. Till then, we can take heart from the fact that ignorant and noob folks like me learnt something from the discussion.
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Old 8th November 2011, 11:43   #86
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Need of the hour is to having a proper pricing policy for Diesel. The subsidy to all Diesel users cannot go on for ever. Right now a huge percent of premium diesel car owners are enjoying subsidised fuel even when they do not deserve the subsidiary. Implementing a different pricing policy for diffirent types of diesel users is going to be difficult. So they can probarbly tax private Diesel car owners additionally.
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Old 8th November 2011, 11:55   #87
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by rm_arjuna View Post
This is , however since you mentioned my reply.

NREGA is used properly only for 10% , balance everything is taken by local contractor affiliated to MLA , MLC and party . I have seen this in close quarter hence the comment . People are paid only 1/3 the amount , that to for not even half day work and if you u happen to see the the payment list , people as old as 70-80 yrs are also in the list .


If actually the project has been implemented in letter & spirit , we would have seen many small irrigation canal's / waterbodies / roads/ wastelands developed . But ground reality is different .

IMHO this scheme is only to benefit the political class.

P.s: My inlaws & close relatives are MRO / tashildar ,hence my comment .
Please read what i had written, in totality. I have said "where it has been used effectively" In my village, it has been, and the change is there for all to see.
The problem is never that there are no good policies. The problem has always been implementation. Corruption is endemic to India, unfortunately.

P.S: I wasn't referring to your post when i mentioned NREGA

Peace.

Last edited by Mik : 8th November 2011 at 11:57. Reason: Incorrect word.
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Old 8th November 2011, 11:55   #88
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

@antz.bin:

Very informative to me - thank you!

In your calculation illustrating how petrol prices are built from from a barrel of crude, you have taken refining cost to be 0.6 (reproduced below):

-----
Petrol is sold in Pune at Rs. 74.06/liter.
Reducing
Refining cost : Rs.0.60
Transportation charge : Rs.6.00
Dealer Commission : Rs.1.05
Octroi @4% : Rs.2.85[/b]
-----

How did you arrive at that?

It seems to me that the cost of refining is not built in the pricing / cost structure you have given. As an example I am attaching the cost break-up of retail price in the US, which indicates that the refining costs were 22 - 25% of crude price and was at about 10% in 2010. (Factors Affecting Gasoline Prices - Energy Explained, Your Guide To Understanding Energy)

Another way to look at the same is through Gross Refining Margin (GRM). The oil and gas industry uses a term called "Gross Refining Margin" which is "the difference between the cost of the input crude oil and the price of the refined product" - typically GRMs are in the range of $8 / barrel to $ 10 per barrel these days - I do not know how GRMs vary between petrol and other products. This component needs to be added in the build-up to the retail price.

IOC's presentation gave a GRM of $6 / barrel for FY 11 - refer slide 28 on http://www.iocl.com/downloads/Invest..._June_2011.pdf. This was at Mar 31 2011. INR has slid by 10% since so the GRM could be at about $ 5.4 / barrel. This GRM is below breakeven (showing a general comparison here - Industry:Oil & Gas Refining). Thus IOC and Indian PSUs are bleeding.

However about 57% of the retail price is collected as taxes - refer page 11 at http://www.iea.org/work/2006/gb/pape...ct_pricing.pdf. A bit dated at 2006 but tax structures haven't changed and oil prices have risen.

So this means out of the Rs 74 / liter:

1. I give Govts (Central and State) by way of various duties 57% or Rs 42.18 / liter.

2. I give Oil PSUs Rs 1.6875 / liter (at GRMs of $ 5.4 / barrel giving 80 liters of petrol. This assumes 50% of GRM apportioned over 80 liters of petrol made from 159 liters of crude in a barrel).

3. I give a disproportionate amount for purchase of crude ( i.e more than 50% of 31.44 / liter that I get from a liter of crude - which is the price of crude @ USD 100 / barrel and Rs 50 to a dollar. There are 159 liters to a barrel)

Given that our fiscal deficit targets may not be met by direct and indirect tax collections, the Govt (via Oil PSUs) is possibly resorting to the reasonable inelastic demand for petrol to bridge part of the gap.

Cheers,
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Old 8th November 2011, 12:08   #89
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

This is indirect way of taxing the already high tax paying middle class.
Inadvertently, this brings in the tax payers.
As per RTI india webstie, India has 31.5 million tax payers, USA has 112 million IIRC. Around 2-3% at max pays tax in India and in USA, more than 44% are paying taxes.
Please note that here I am posting the absolute numbers and not banking upon the % numbers.

Most of the 2-3% are suffering hugely because of such high indirect taxes. Reliance was not offered support ( when they were to start their own sales network of fuel ) by central govt. as it would reduce the sales of govt. oil companies. Shell and RIL have almost similar quality and technology ( that is what I have read and got information from RIL employees ) still as Shell has better brand value they are able to do business.

What actually happens at IOC refineries is what most are not aware of. Anybody living in my city would tell you what actually happens and where the corruption is, how much refined fuel is literally stolen/sold off illegally. All this at the cost of the honest tax paying middle class.

Even if one looks at the balance sheets of most oil companies, they are not exactly at loss, but making less profit. When IPCL and other PSU were not going good, they were Disinvested. If oil companies are making loss as per governent statements, why not disinvest in them also ? There can be written bond that during emergenecy situation all the disinvested companies would be suppling oil to govt., that it.

The current pricing is an perfect indicator of corruption, nothing else. No wonder, we are in a nation where defense budget was smaller than 2G scam.
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Old 8th November 2011, 15:09   #90
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by antz.bin View Post
The mathematicians amongst us would try to find faults in this data. So, the following link is for self study for them. The example used is from US. But percentages wouldn't change, would they?

Where Does Our Oil Go? | Mean Green

duced by Rs1.5 per litre The Express Tribune
Welcome to Pakistan State Oil
Fundamental flaw in your analysis. You are assuming, that you will always get approx 50% of crude oil as Petrol.
However, this is not true. Depending upon market demand, you can actually tune the percentage of Petrol vs diesel.
Cheaper, heavier(sour) crude produces much less petrol as compared to sweet(brent?) crude.
I guess you need to ask a petroleum engineer working in the Indian refineries as to what is the percentage they get after their cracking progress.
US numbers are totally irrelevant to India, as most of the consumption there is passenger cars. Even SUVs and light trucks in USA run on Petrol. So market demand for petrol is very high, and refineries fine tune their cracking process to cater to market demand.
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