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Old 29th September 2012, 14:38   #166
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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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.
Yes Sir, I am aware of the duty draw backs and tax credit available for various inputs. Such input credits on taxes/ duties already paid are available on all Petroleum products except Diesel & Petrol. For Example if you buy Furnace Oil from us, the excise charged to you can be drawn back against your Excise dues. Also VAT paid to State govts can be taken as VAT credit for further taxes due from you. This is true for Commercial LPG and all other petroleum products, except Petrol & Diesel.

Duty drawback and tax credit is as such not applicable/ useful to the retail customer.

Quote:
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?
Completely agree with you there. Govt being Govt is free to charge whatever taxes it deems fit, but it should also allow all the taxes paid to be recovered from the final customer, instead PSU oil companies are being bled and the populace is shown a mirage of subsidized product, but actually a lot of money has already been fleeced from the same populace in the form of taxes. Therein lies the scam as mentioned by you in the passage quoted below.

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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.
T
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his 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.
The point has been correctly raised and brought out by Hayek in this thread before which I am quoting again

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Originally Posted by Hayek View Post
TThe subsidy payments from the GOI are given in the form of long dated bonds which are NOT eligible for Statutory Liquidity Ratio (SLR) treatment by banks - and hence are not really tradable. If I recall correctly, at least a couple of years back, the bonds carried no (or a below market) coupon - but we're still recognised at face value by the OMCs - I need to check if that practice is still being followed. In short, the profits shown by the OMCs involve at least debatable accounting policies, and they are suffering from negative cash flows from operations in any case. (Note : Checked this, at least IOC is now marking these bonds to market and providing for mark to market losses).
Increasing the prices of diesel bringing it in line with international prices is only way in which we can be weaned from our love for diesels and sorting out the accounting & taxation mess we find our selves in. The trend will continue till we have masses of people who are ready to be swayed by propaganda of subsidy.

For your info I am attaching the price break up of petrol & diesel price at Bangalore, since fuel seems to be the costliest in that city. Import duty on Crude has since been abolished.

Regards
Attached Files
File Type: xlsx PRICES_BLORE.xlsx (10.6 KB, 155 views)
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Old 29th September 2012, 20:23   #167
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

I wonder why the hike was even required.

How many Indians are direct tax payers ? Approx. 3% of India's population.
http://www.siliconindia.com/shownews...946-cid-3.html

Why is GOI not acting on this ?

1) Subsidy.
GOI should declare the amount of taxes applicable on each litre of petrol, diesel, LPG,etc. and then mention subsidy.

Is this done ?

2) Quality. Are we getting good quality and honest quantity ?

3) Why are even OMC's even operating if they are SICK units ?

This is my biggest grudge. Worse than even Coal Scam or 2G scam is running the SICK units.
If a firm is making loss, why pay huge salaries to its employes ? If a big private firm goes into red, the salaries of its employees are likely to be affected. If, lets say, Adani makes loss of Rs. 22,000 Crore. Then do you think that Adani employees would get high salaries ?

Then why is this done in IOCL, etc. ? To eat into honest tax payers's money ?

Reliance is not selling its fuel in India ( it was a political move, deliberately a lot of things were set against them ), but still is profitable unit. Why not IOCL ?

Reduce the salaries of govt. OMC employes to half of what they are getting and then see if profit is coming. Else, sell off those OMC and see some other major like RIL or even Shell, etc. eek out profit from IOCL.

Why a govt employee gets laptop free ? White goods they are called in Govt. terminology. This is clearly wrong because if a firm is not able to even stay afloat and still manages to get all resources, then that firm is a headache for nation's honest taxpayers.

Without more transparency and efficient vision, we are going down again. Inflation is certainly at a killing level, growth is much less than what we are capable of and everybody is frustrated. The recent price hike of energy related products has further spoiled the game. Its only a matter of time before the bubble bursts.
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Old 29th September 2012, 20:49   #168
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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 aaggoswami View Post

Reliance is not selling its fuel in India ( it was a political move, deliberately a lot of things were set against them ), but still is profitable unit. Why not IOCL ?
What kind of question is this in the context of the current discussion? You are comparing a company which is not selling in India & one which is selling in India. Why not just compare IOCL with Apple and say Apple is profitable, why not IOCL?

Last edited by carboy : 29th September 2012 at 20:59.
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Old 29th September 2012, 21:40   #169
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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What kind of question is this in the context of the current discussion? You are comparing a company which is not selling in India & one which is selling in India. Why not just compare IOCL with Apple and say Apple is profitable, why not IOCL?
To highlight the ineffeciency of IOCL ( and other OMC ). And even with loss, IOCL ( and other OMC ) are not able to provide good quality fuel ( plus they cheat on quantity also ).

These OMC are perfect case of pathetic management and paying non deserving employees inflated salaries.
Reliance purchases the crude which is not sweet crude, processes it and then sells it outside. Here, despite the international trade and fluctuating currency, if a private firm can make profit, why cant OMC ? OMC get the best crude available.

Certainly, the case goes deeper than just subsidy and taxes.

1) How much diesel is used by cars ? How much by trucks ? How much by Railways ? Railways is not 100% electrified. Why not increase price of diesel for railways and bring it on market rate ?
Railway is relatively cheap despite the increase in all energy forms ? Why ?
Its again tax payers money gifted out to others.

2) How much diesel is used by DG sets ? Why DG sets are required ? Because we cannot produce electricity, and then we realize what is going on in case of Coal.

One of my teachers was working with State Govt, told me that one has to so much bribe to railways, that even govt. firm cannot afford to do so, and hence they hire commission agents. This has to be done otherwise the coal wont reach Sikka ( a place in Gujarat ). To let the train move, a lot of bribe has to be paid and here also the typical BJP/NDA vs Congress ruled state issue comes in.

Was there not an article a few days ago that a lot of diesel goes even in telecommunications towers ?

Where is the split ?
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Old 29th September 2012, 21:48   #170
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Reliance purchases the crude which is not sweet crude, processes it and then sells it outside. Here, despite the international trade and fluctuating currency, if a private firm can make profit, why cant OMC ?
Again, Reliance is selling it outside. They are not subject to Indian Govt. Price Controls and Indian Govt tax on selling Fuel in India. So it's a meaningless comparison.

Why is Reliance not selling fuel in India? If the inefficiencies were the only cause of losses of IOCL, Reliance can eliminate those inefficiencies and sell petrol at 70Rs and make huge profits. Especially considering they have one of the biggest and most modern refineries in the world.

Anyway, Reliance refining margins are getting seriously cut even with their overseas customers.

http://articles.economictimes.indiat...-grms-refining
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Old 29th September 2012, 22:53   #171
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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 pganapathy View Post
The only realistic way for the government to not raise gasoline prices while reducing the subsidy is to cut taxes. Unfortunately that does not seem to be an option considering how dependent on this tax the government is for funding - primarily their scams - but still.
This has been done recently. While everyone stood up in arms because Diesel was hiked by Rs 5/lt, what went unnoticed was that the Govt reduced excise on Petrol by Rs 5/lt thus saving the customer from hike in price while giving up its share of revenue to compensate OMCs for the increased cost of petrol.
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Old 29th September 2012, 23:37   #172
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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This has been done recently. While everyone stood up in arms because Diesel was hiked by Rs 5/lt, what went unnoticed was that the Govt reduced excise on Petrol by Rs 5/lt thus saving the customer from hike in price while giving up its share of revenue to compensate OMCs for the increased cost of petrol.
That is true. They had increased the price a month or two back by 5 rupees or so and then brought it down by a similar amount. I can only hope it is actually the government seeing some sense and reducing the taxes. In the long run these taxes will either need to be reduced or spent more wisely than it is at present if the country does not want to see riots or some such form of protest against bad management by the government.
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Old 29th September 2012, 23:43   #173
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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They should do something. All cars, made in india, should be only of petrol. This is the only way in which car users could be forced to use Only petrol.
Very good suggestion. Ideally, to begin with, the Govt should never have permitted diesel cars to be registered for private use, effectively banning them. But they didn't have a foresight 10 years back. Now its too late. Consumers have tasted blood and Automobile lobbies are too strong to let their investments go down the drain.
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Old 30th September 2012, 00:02   #174
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From what I recall, the excise on petrol was reduced, but the 5 rupee hike on diesel had an excise component to compensate for the excise cut on petrol. Since a much larger quantity of diesel is sold, the excise component factored in the 5 rupee hike was probably around 1.5 rupee or so.

The government did not forego any revenue. The revenue source was just transferred from petrol to diesel.
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Old 30th September 2012, 00:54   #175
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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From what I recall, the excise on petrol was reduced, but the 5 rupee hike on diesel had an excise component to compensate for the excise cut on petrol. Since a much larger quantity of diesel is sold, the excise component factored in the 5 rupee hike was probably around 1.5 rupee or so.

The government did not forego any revenue. The revenue source was just transferred from petrol to diesel.
Yes, something of the kind, but its the right move from the govt. On diesel, they did not reduce excise - so, higher price means higher excise revenue per litre.
Govt is doing the right thing (in a very long time) by reducing the gap between diesel and petrol rates. Over time, they should bring it down further.
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Old 30th September 2012, 15:02   #176
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

Here is an article by a former energy secretary about the double standards regarding subsidy, just as many have raised the point here, subsidy for whom really? Every price increase is a vicious circle that starts with customer and ending with them, with benefit accruing mostly to the government (of the people?).

http://tsr.net.co/2012/09/the-facts-...7#.UGgOBI3A8rU
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Old 30th September 2012, 15:52   #177
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Here is an article by a former energy secretary about the double standards regarding subsidy, just as many have raised the point to the government (of the people?).

http://tsr.net.co/2012/09/the-facts-...7#.UGgOBI3A8rU

This is the best part about all retired civil servants. Once the chair and it's perks are gone they suddenly find religion as in become mindful of the public good, which they deliberately worked against when in power. This man's railings are hypocritical to put it mildly.
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Old 30th September 2012, 17:12   #178
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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This man's railings are hypocritical to put it mildly.
I dont blame you for your views on bureaucrats, who are often hand in glove with political bosses. If we strip the identity of the writer, and the fact that he could have done something while in his 'gaddi' (seat of power), maybe the man has a point on the vicious trap imposed by taxation policies!
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Old 30th September 2012, 17:50   #179
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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This is the best part about all retired civil servants. Once the chair and it's perks are gone they suddenly find religion as in become mindful of the public good, which they deliberately worked against when in power. This man's railings are hypocritical to put it mildly.
Where are you drawing this from? What experience do you have with "all" retired Civil servants?
Agreed, its very often that you find these guys in the wrong, but you are probably not aware as to how much friction an opposing bureaucrat will draw from the elected officials.
Why? because these elected officials see the underhanded money as their right apparently, to set them up for retirement in case they dont get back in power.
The one or two crusaders that you hear about cover up numerous others who have been suppressed either geographically or in the worst case, with violence.
How do I know? I know from a personal level.

When one of them comes out post retirement to let you know about what was happening, its because he doesn't have the figurative "talwar" over his head.
Tell me, he is saying, if you "xx" the figures, the same thing that anybody against the price management has been saying. So, if he preaches now that that management is actually mismanagement, it is abhorrent?

Last edited by GTO : 1st October 2012 at 12:51. Reason: Removing offensive lines. Keep it objective please
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Old 30th September 2012, 19:07   #180
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

[] I am willing to post my experience here of how we i.e my family has battled and is battling an ex bureaucrat and his kin for the past 11 years in a criminal mater, and how this man has abused the laws of this country to protect his kin, of how we are being targeted by criminals working in league with this man and law enforcement . This man lives like a true aristocrat and that too on a central services pension!! Let the mods give me permission to do so and I will start a new thread on this.

[] I have seen enough and more of these types living in horrid accommodation during their service tenure and the moment they retire the very nature of their existence changes from austere to affluent to the level of extravagant!!

[] Ever had to deal with them when you need to get something done from the government? They treat you like a supplicant standing in front of a neo mughal, and the worst part is when it comes to the work to be done, they don't do it because some bloody clerk in their office is the greasing point for the sahib. Yes, I have seen it n number of times.

Please do not tell me about conscientious bureaucrats. There may be some which I will agree, but the vast majority are there to derive an economic rent for the position they occupy and that is the experience of most of the Indians who may have the misfortune of needing something from the government.

If I have offended you at a personal level my regrets, but please do not try to tell me what I have experienced in 30 odd years of my adult existence while dealing with these types is a figment of my examination!

ps: I have just read your signature and that is the point I have reached psychologically now. Either way we i.e. our family. are condemned, whether we fight back or not and now we are fighting back.

Last edited by GTO : 1st October 2012 at 12:52. Reason: Quoted post has been edited
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