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Old 27th September 2012, 12:58   #151
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Originally Posted by sgiitk View Post
Targeted subsidy is the answer. Use Aadhar for transferring the subsidy directly into the account. Now you see why so many are opposing Aadhar!!
There may be many reasons for opposing Aadhar. For eg. I will oppose Aadhar if it's made compulsory. It's not as of now & so I can opt out of getting one.

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Originally Posted by sgiitk View Post
Of course the banks will have to be coerced into opening zero balance accounts, with less red tape.
If banks on their own don't allow zero balance accounts, then won't coercing them into this be another form of subsidy. i.e. banks may not want zero balance accounts because those accounts are loss making. So if you force banks to allow these, won't they have to be subsidized for this by the govt? If not, won't they pass these costs onto other accounts?

Last edited by carboy : 27th September 2012 at 12:59.
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Old 27th September 2012, 14:21   #152
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Originally Posted by carboy View Post
If banks on their own don't allow zero balance accounts, then won't coercing them into this be another form of subsidy. i.e. banks may not want zero balance accounts because those accounts are loss making. So if you force banks to allow these, won't they have to be subsidized for this by the govt? If not, won't they pass these costs onto other accounts?
True, Taking from hand and giving with another albiet after leakages and losses therefore less than intended.

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Targeted subsidy is the answer. Use Aadhar for transferring the subsidy directly into the account. Now you see why so many are opposing Aadhar!! I
A pilot project has been started in Rajasthan to give subsidy on Kerosene directly to the beneficiary's bank a/c through Aadhar. Also another similar pilot project is on in Madurai for LPG.

This however may be difficult in case of diesel as there are few actual BPL families who buy diesel directly for their own use. The subsidy on Diesel is based on the premise that since it is a Goods transportation fuel, increasing the prices will increase inflation, a sore point with the Govt, which is already drawing a lot of flak on that front.

A gradual 10 Paisa at a time increase over a few years to align ourselves with the international prices will avoid putting a sudden inflationary pressure on the economy. State and central governments can give other tax concessions to public transport utilities to make bus & train travel cheaper. Eg Rajasthan Govt levies 13% VAT of sales to State Transport U/t compared to 18% for general public. Contrasting that with Kerala Govt, which does not make any such distinction.

But again Politics...politics and more politics..
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Old 27th September 2012, 15:03   #153
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Targeted subsidy is the answer. Use Aadhar for transferring the subsidy directly into the account. Now you see why so many . It the past I used to just sign and give it. Yesterday the chap insisted that I fully fill in the slip.
Once again I am going to commit heresy.

This problem WILL NOT go away as long as there is subsidy involved in energy pricing.

The solution lies elsewhere. In managing the food reserves competently for one. In allowing the benefit of market prices to reach the producers of food i.e. grains/perishables.

In today's scenario the so-called value adders i.e. the mandi-wallas are rapaciously looting the food producers and the end consumers. There was a post to this effect by @TSK wherein he described how the lalajis' break the price of the farmers who go to sell their crop in the grain markets.

Not tackling misdirected/misused subsidies in the name of the poor is akin to burying our collective heads in the sand. But it is very very profitable for the neta/babu combine and their cronies( who fund them i.e. the neta & babus) as a quid pro quo for such policies. To give you an example I am aware of a central services officer who first moved to a national level organisation dealing with the food business on a deputation and then resigned his position in the central services once he got a permanent appointment in this body. This gentleman's affluence is the stuff of envy of very well established businessmen!!

So after this long digression I will submit this whole energy business is out of whack. Once a semblance of normalcy is restored here and rational pricing policies are followed this skew will prove to be unsustainable.

Last edited by RS_DEL : 27th September 2012 at 15:04.
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Old 27th September 2012, 15:12   #154
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

@RS_DEL; Agree. Saw on the box (NDTV-Profit) that generation capacity is idle for want of coal and the inability of the states to pay.

@carboy; Banks are obliged to open zero balance accounts. It is the staff who do their best to shoo away the poor. Almost all salary accounts are also zero balance accounts.
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Old 28th September 2012, 20:26   #155
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

http://economictimes.indiatimes.com/...w/16590199.cms

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According to the panel, half of diesel subsidy should be eliminated by March 2013 and the rest by FY14. The panel emphasised the need to eliminate subsidies and has recommended a hike of Rs 2 per litre for kerosene prices.
Will Govt think of taking the risk? Not sure. But definitely a point to think about. If not in 6 months, surely in less than an year
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Old 28th September 2012, 21:36   #156
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Originally Posted by mjothi View Post
http://economictimes.indiatimes.com/...w/16590199.cms



Will Govt think of taking the risk? Not sure. But definitely a point to think about. If not in 6 months, surely in less than an year
Why not. This should free up more funds for more such parties http://english.samaylive.com/nation-...ary-party.html.

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You might have come across many instances of extravaganza in government offices. But it is unbelievable that a plate in a dinner party hosted by the government can cost Rs 8000. Surprised? But you read it correct.
Both diesel and LPG is free for them. Why should they bother. After all the common citizen of India is self conscious, righteous and conscientious enough to make large sacrifices by paying higher taxes and enduring higher prices for the greater good of the nation while these guys party hard.

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Old 28th September 2012, 22:26   #157
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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One of the best kept secrets in India is the actual cost of petroleum products and the taxes levied on it. The Govt. would like you to believe that petroleum products are subsidized. The fact of the matter is that huge taxes are levied on petroleum products.

Have you noticed that whenever we buy something, if some indirect tax like, Excise, VAT, Service Tax, is levied, that tax amount is shown separately in the bill. Ever wonder why these taxes do not appear in petroleum product bills?
Fully agree with Lapsi regarding the govt. hoodwinking the public about so-called 'under-recoveries' in petro products without deducting custom duties, misc. taxes and excise duty.

There is one more 'best kept secret' on this issue -- the huge inefficiencies and corruption in the public sector oil refining / marketing companies which greatly inflate the prices of end products like petrol, kerosene, diesel, LPG, etc. Have you ever heard of the PSU companies benchmarking their conversion (crude oil to individual petro product) cost? This is another major scam that needs to be exposed.
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Old 28th September 2012, 23:21   #158
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Fully agree with Lapsi regarding the govt. hoodwinking the public about so-called 'under-recoveries' in petro products conversion (crude oil to individual petro product) cost? This is another major scam that needs to be exposed.
Another scam story ! Wow!
OMC's are not extensions of the government!

They are commercial entities wherein the state has a stake due to historical reasons. Taxes paid by them are akin to taxes paid by any commercial entity. They are obligated to recover them from the consumer. That's the end of the matter.

If the end product cost + profit margin + taxes to federal & provincial governments < retail point selling price , that is a loss scenario. Simple arithmetic.
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Old 28th September 2012, 23:34   #159
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Originally Posted by debuda View Post
There is one more 'best kept secret' on this issue -- the huge inefficiencies and corruption in the public sector oil refining / marketing companies which greatly inflate the prices of end products like petrol, kerosene, diesel, LPG, etc. Have you ever heard of the PSU companies benchmarking their conversion (crude oil to individual petro product) cost? This is another major scam that needs to be exposed.
What about private oil companies? If the public ones have huge inefficiencies, then private ones should be making huge profits selling at the same price as public oil companies. Is this happening?
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Old 29th September 2012, 02:08   #160
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Dear Sir,

I am a PSU Oil Company manager and hence can claim insider knowledge of the information which is considered privileged but otherwise available to public.
Good to now that you are a part of a PSU Oil Marketing Company. This can be very useful. You could use your position to access data by making roving inquiries and coming to your own conclusions.

And since you have given your background, I would like to share with you that I am a practicing Chartered Accountant.


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I am also aware that all indirect taxes are borne by the consumer. The taxes levied at the time of actual transaction at the transaction are shown in the bill. Eg if you buy a mobile, local govt levies VAT on the product which is levied at the time of sale transaction between by the seller the customer and recovered from him/ her and shown in the bill.

However in case of petroleum products the oil company pays the VAT and is recovered from the buying dealer and is shown in his bill at the time of the transaction. Since the transaction between the dealer and customer is not taxed any further the dealer does not pay any further tax on the product hence does not recover any additional amount from the final customer, hence does not show any taxes on the bill.

This is not as simple as you have put it. It is slightly technical. Normally, all Indirect Taxes paid, are available for Input Credit. So if you are a company paying Excise, VAT or Service Tax, you get input credit for these taxes paid by you on the purchases made by you. Due to this your net Indirect Tax payment to the Govt. is reduced by this amount.

An example: As a salaried employee, if your fuel bills have the tax amount written on them and if you submit those bills to your company, your company could have claimed Input Credit of the Indirect Taxes paid and hence their Indirect Tax payment to the Govt. would have been reduced by this amount.

This is not so in case of petroleum products. The Govt. does not give Input Credit for any Indirect Taxes paid on petroleum products. If it did, the tax amount would be revealed to the general public.


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Oil industry contributes almost 15% of the total revenues of Govt of India (all heads included) and in some states like Kerala 50% of their tax revenue in the form of VAT levied.

The point that I wanted to make is that Govt collects the taxes but, does it passes on the full loss/ under-recovery to the oil companies?? It does not. Part of the losses are covered in form of what is called Subsidy. Both Govt and Oil Companies are separate bodies.

The info shared by me in my post No 127 is the actual information. I just wanted to state that information such as losses of oil companies etc can be gained from the newspapers and public websites etc.

I can understand your angst as PSU Oil Company manager regarding the under-recovery to the Oil Marketing Companies (OMC). You are completely right when you say that Govt collects the taxes but, covers only part of the losses incurred by the OMC. You will also agree that if the taxes were lower, there would not be any losses to the OMC.

Now, I will briefly explain the petroleum products taxation/subsidy accounting jugglery conducted by the Govt.

Lets say the cost of the refined product is 20.
The various taxes levied by the Govt. are 80.
Sale price fixed by the Govt. is 75.

Since the OMC sells below Rs. 100, it incurs a loss. The Govt. claims that there is a subsidy of Rs. 25 on the product, but it never reveals that it has charged Rs. 80 as taxes on this product.

The question is:Is it really a subsidy, if the cost of the product is first increased due to high taxes?


Also, more importantly, the Govt. recognizes the revenue from the taxes collected in its budget but the OMC are made scapegoats and the so called "subsidy" losses are incurred on the books of the OMC.

Out of the Rs. 47,000 crores "subsidy" which you mention in the post # 127, only Rs. 1,820 crores has come from the Govt. The rest of the amount, more than Rs. 45,000 crores of "subsidy" is received in other forms, which do not form a part of the expenditure in the Union Budget.

This is plain and simple window dressing of the Union Budget of the Govt. of India. Show more revenue, so that they can spend more.

This is what was done by Enron. All the liabilities incurred by Enron were kept off the books of Enron and retained on books of other companies. There is no difference between what was done by Enron and what is done by the Govt.

Such accounting tricks would not be allowed if a corporate entity did it. It is nothing short of a scam.


It is time for us to wake up, smell the coffee and think for ourselves and question the propaganda that is being fed to us, instead of simply believing whatever is told to us by this Govt.

Last edited by lapsi : 29th September 2012 at 02:20.
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Old 29th September 2012, 02:47   #161
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Originally Posted by lapsi View Post
Lets say the cost of the refined product is 20.
The various taxes levied by the Govt. are 80.
Sale price fixed by the Govt. is 75.

Since the OMC sells below Rs. 100, it incurs a loss. The Govt. claims that there is a subsidy of Rs. 25 on the product, but it never reveals that it has charged Rs. 80 as taxes on this product.

The question is:Is it really a subsidy, if the cost of the product is first increased due to high taxes?
Consider 2 products - diesel and petrol.
Assume both cost Rs. 20 out of the gate of the petroleum company.
Let's say taxes levied by Govt on both is 80.
But the sale price of Petrol is fixed at 100 & that of diesel is fixed at 75.

Then as far as the Petrol car owner is concerned, the diesel car owner is getting a subsidy.

In this case, Diesel is getting an indirect subsidy because its not being levied the same tax as other comparable products.

Last edited by carboy : 29th September 2012 at 02:49.
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Old 29th September 2012, 08:33   #162
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

Sensationalism to an extent I admit, but interesting nevertheless.


http://www.firstpost.com/economy/per...rs-472357.html

The entitlement mindset of a middle class in all it's glory!
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Old 29th September 2012, 09:36   #163
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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This is plain and simple window dressing of the Union Budget of the Govt. of India. Show more revenue, so that they can spend more.

This is what was done by Enron. All the liabilities incurred by Enron were kept off the books of Enron and retained on books of other companies. There is no difference between what was done by Enron and what is done by the Govt.

Such accounting tricks would not be allowed if a corporate entity did it. It is nothing short of a scam.


It is time for us to wake up, smell the coffee and think for ourselves and question the propaganda that is being fed to us, instead of simply believing whatever is told to us by this Govt.

Very well said The unfortunate part is the Govt, whichever party, comes into power, will do the same as they take the public for granted.

Last edited by headers : 29th September 2012 at 09:38.
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Old 29th September 2012, 10:32   #164
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Then as far as the Petrol car owner is concerned, the diesel car owner is getting a subsidy.
Though logically correct but very funny . Isn't kerosene also enjoying subsidies that are funded through taxes collected on petrol? Looks like only diesel is the favorite boy to be beaten up. Or the government clearly demarcates taxes collected from petrol users and ensures that only that money is provided as a "subsidy" to the diesel car users?

There is this giant subsidy bucket that the government must fill which also hides some of the most frivolous expenses the government incurs, one example I already presented showing a Rs 8000 per plate dinner that our "astute" deficit conscious ex FM/PM recently hosted. To do that the government has to tax the hell out of anything they can or reduce "subsidies" against taxes collected on products, which in turn directly hits the service/middle class. They will of course never touch any subsidy that can upset their vote banks as is evident from their rejection of the Kelkar report today morning. I am amused to see all these high profile committees never ever doing an in-depth study of the obvious losses of corruption to the Indian exchequer. The best they do is either make a passing reference or simply gloss over it. Analysis after analysis has shown that within this giant subsidy bucket the government claims, a significant percentage of the money is lost due to financial profligacy and corruption. But then that is how our country has become, austerity for the masses, profligacy for the classes.

Last edited by samarjitdhar : 29th September 2012 at 10:38.
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Old 29th September 2012, 11:48   #165
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Originally Posted by carboy View Post
Consider 2 products - diesel and petrol.
Assume both cost Rs. 20 out of the gate of the petroleum company.
Let's say taxes levied by Govt on both is 80.
But the sale price of Petrol is fixed at 100 & that of diesel is fixed at 75.

Then as far as the Petrol car owner is concerned, the diesel car owner is getting a subsidy.

In this case, Diesel is getting an indirect subsidy because its not being levied the same tax as other comparable products.

This is a case of everyone suffering at the hands of a single oppressor but not realising it. The current situation is that:
  • The manager of the OMC is miffed that there is under-recovery of losses from the Govt.
  • The petrol car owner feels cheated as diesel is cheaper.
  • The diesel car owner has already been taken for a ride due to higher taxes and registration charges.
All three are suffering but instead of identifying the real source of the problem, which is exceptionally high taxes, everyone is busy blaming each other.

An excellent example of divide and rule.


Everyone is free to believe whatever the Govt. propaganda says but the fact of the matter is that there is NO subsidy on any petroleum products.


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Originally Posted by samarjitdhar View Post

Analysis after analysis has shown that within this giant subsidy bucket the government claims, a significant percentage of the money is lost due to financial profligacy and corruption. But then that is how our country has become, austerity for the masses, profligacy for the classes.
Completely agree.

But instead of being nice and saying "financial profligacy and corruption", I would also call it outright looting of the exchequer.
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