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Old 20th September 2012, 14:26   #106
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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 Turbokick View Post

Just for example a Altis diesel aspirant may end up buying a Verna or Vento diesel.
If their luxury comes at a cost to social cost that society is harmed buy, I don't think it wrong for them to live within their actual means (vento/verna) rather than enjoy a luxury subsidized by an expense to society (the corolla).

Thats what ultimately this argument for keeping diesel prices low for passengers cars is: A desire to enjoy a higher standard of living that is paid for by other people.

The millions who can only afford two wheelers or sub 3-lac rupee petrol 4 wheelers don't get assistance to live better, so why should those with the money to buy diesel cars?

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Old 20th September 2012, 14:49   #107
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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 Harbir View Post
If their luxury comes at a cost to social cost that society is harmed buy, I don't think it wrong for them to live within their

4 wheelers don't get assistance to live better, so why should those with the money to buy diesel cars?

When I had said the exact same thing, the response that was forthcoming was that we deserve more for our taxes than we receive as citizens from the state, therefore the question of inequity in diesel subsidy used for personal vehicles is a non-issue.

While there are a lot of folks who rationalise their demand for subsidised diesel on the basis of FE, environmental reasons etc, unfortunately there are an equally large number of folks who see it is a compensation for the reasons stated above.

Last edited by RS_DEL : 20th September 2012 at 14:51.
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Old 20th September 2012, 15:28   #108
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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 Turbokick View Post
Do you really believe that price of Petrol can be cut down by say Rs 5-10/- per litre ? Even at Rs 60/- per litre, its not all that affordable to run a petrol car if your monthly running is on the higher side.
Though one thing we can assume is that petrol prices won't go up as rapidly in the coming time.

If diesel prices go up then I am sure demand for cars will be come down.Maruti,Hyundai,Ford,Tata etc largely depend on their diesel cars for the volume they generate.

While the low mileage running/enthusiasts will stick to petrol cars, rest people who largely depend on their cars will have a tricky situation to face. Maybe they will move a segment down or go the 'cheaper to own' petrol variant.

Just for example a Altis diesel aspirant may end up buying a Verna or Vento diesel.

It won't be a encouraging situation IMO
Can the price of both diesel and petrol be reduced. The short answer is yes. Unfortunately there are complications.

Something like 50 percent of the present price is tax. Cut taxes and the price comes down. Goa is a perfect example. Petrol costs around 55 to 60 rupees a litre IIRC. Bangalore is around 75. The CM of Goa reduced some of the taxes (VAT I think) and cut the price.

The complications are the fact that the GOI is highly dependent on gasoline taxation for a large chunk of their income. Political willingness to cut this is a concern as less govt income means something has to be cut or underfunded. You can't do anything about populist schemes because that will cost you votes. You can't cut the money into infra structure creation and maintenance as that affects the future of the country and economic growth.

Ideally we should stop all the money disappearing into corrupt officials pockets and scams and it will then be enough for the government to be able to reduce taxation rates and still run the country.
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Old 20th September 2012, 17:04   #109
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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 mayankk View Post
I think from now onwards every sale of a petrol car , used or new, should take place with a disclaimer:
1. I am aware that I am buying a PETROL vehicle.
2. Future circumstances may dictate that user's travel per day may increase by as much as 200%.
3. Hikes will preferable for the GoI to be implemented on Petrol rather than diesel.
4. In case of aforementioned hikes, bought petrol vehicle's resale value may decline by 50-100%
5. Knowing all this, thou shalt not covet thine neighbor's wife, er, car!!

All of us petrol users knew this, have known this, for eons now.
And if we sign this, then we have only ourselves to blame.
I know a decontrolled diesel option will, fairly or unfairly, strap a saturn V to prices of everything.
So I take a pledge to not be a crab anymore, and use my petrol to line up more sales meetings, close more deals, and build my incentive.

So that I can buy a diesel as my daily drive.

Amen.
[COLOR=black]Ha! Fully agree there . Always felt the pinch during those frequent trips to the bunk. Always regretted having bought a petrol version. [/COLOR]
[COLOR=black]I fully welcome the diesel hike and applaud the government on taking such a bold step. Kudos! But I want to ask the experts out there, why canít the government try implementing different fuel for private and public transport? A fuel by its inherent property cannot be used for smaller cc private cars? Is it feasible ?[/COLOR]
[FONT=Calibri][/FONT]
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Old 20th September 2012, 17:14   #110
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Quote:
Originally Posted by Harbir View Post
If their luxury comes at a cost to social cost that society is harmed buy, I don't think it wrong for them to live within their actual means (vento/verna) rather than enjoy a luxury subsidized by an expense to society (the corolla).

The millions who can only afford two wheelers or sub 3-lac rupee petrol 4 wheelers don't get assistance to live better, so why should those with the money to buy diesel cars?
That's arguement which has been done zillions of time and my point was solely based on how automobile industry is going suffer once the price diesel is near equivalent to that of petrol which is the exact aim of this topic.
People will ultimately stop buying cars.



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Originally Posted by pganapathy View Post
Can the price of both diesel and petrol be reduced. The short answer is yes. Unfortunately there are complications.

Something like 50 percent of the present price is tax. Cut taxes and the price comes down. Goa is a perfect example. Petrol costs around 55 to 60 rupees a litre IIRC. Bangalore is around 75. The CM of Goa reduced some of the taxes (VAT I think) and cut the price.

The complications are the fact that the GOI is highly dependent on gasoline taxation for a large chunk of their income. Political willingness to cut this is a concern as less govt income means something has to be cut or underfunded. You can't do anything about populist schemes because that will cost you votes. You can't cut the money into infra structure creation and maintenance as that affects the future of the country and economic growth.

Ideally we should stop all the money disappearing into corrupt officials pockets and scams and it will then be enough for the government to be able to reduce taxation rates and still run the country.
You have a very valid point there.
Taxes are like a necessary evil. But the misutilization of it needs to be checked.
Our govt or infact we people don't have a proper long term plan. I am sure in the coming time foreign automobile companies will be reluctant to invest in India thanks to your volatile policies
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Old 20th September 2012, 17:22   #111
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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According to some info, (Dont remember the source) Diesel usage for personal use (Car users) accounts for 0.6 0.8 % of total diesel consumption.
I think it is the other way around - Increasing Petrol prices hardly realizes revenue as most petrol machinery are owned by Government and Government aided institutions.

Whereas Diesel fuel price has a bearing on the transport segment of the nation and this indirectly has its impact on almost everything.

I would like to see a government where the politicos do away with their battalion of vehicles [mostly petrol] in the name of security and follow ALL TRAFFIC RULES like any other citizen, but that I'm aware that is wishful thinking

[OT]

If the economy has to improve, our judicial system has to improve and most subsidies need to be eliminated
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Old 20th September 2012, 17:35   #112
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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 headers View Post
I think it is the other way around - Increasing Petrol prices hardly realizes revenue as most petrol machinery are owned by Government and Government aided institutions.

Whereas Diesel fuel price has a bearing on the transport segment of the nation and this indirectly has its impact on almost everything.

I would like to see a government where the politicos do away with their battalion of vehicles [mostly petrol] in the name of security and follow ALL TRAFFIC RULES like any other citizen, but that I'm aware that is wishful thinking

[OT]

If the economy has to improve, our judicial system has to improve and most subsidies need to be eliminated
Now i think, its the other way around. We have hardly 500 MP's say another 5000 MLA's. SO the number of cars that might be used for them would be 500 * 5 = 2500 Petrol cars (Please note that rest of the govt offices use diesel cars mostly. True to AP. not sure of others.)

These Netas hardly roam. much less than a truck driver roams. They drive for one hour and they chat for 10 hrs at each place. Consumption is less for sure. So petrol is consumed less.

If diesel prices are deregulated, what would be the financial soup in which we would be in? Just imagine what would happen if everything costs double that what it costs now. Salary will not be sufficient to live. What about poor?
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Old 20th September 2012, 17:43   #113
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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 Turbokick View Post
That's arguement which has been done zillions of time and my point was solely based on how automobile industry is going suffer once the price diesel is near equivalent to that of petrol which is the exact aim of this topic.
People will ultimately stop buying cars.
people will not stop buying cars in a country like India when our public transport infra structure sucks so much. The only realistic way to get an office in Bangalore is personal transport or some form of public transport (bus, cab etc.) that your company organises for you. Public buses are generally bad except to certain areas and autos are just fleecing machines. the metro at present is only one 6 ot 7 km run.



[/quote]You have a very valid point there.
Taxes are like a necessary evil. But the misutilization of it needs to be checked.
Our govt or infact we people don't have a proper long term plan. I am sure in the coming time foreign automobile companies will be reluctant to invest in India thanks to your volatile policies[/quote]

I do not object to taxes per se, but my biggest concern is how almost every politician and bureaucrat in this country is corrupt and government funds are mis-allocated. My second concern is how we have a subsidy for just about everything in this country. Stop these two and the money available to our government will be in such surplus that taxes on just about everything can be cut.

Talking about how foreign companies will be reluctant to invest in this country, first let us try and keep local companies investing here. There are enough and more local investors and companies that are choosing to invest their money outside India rather than here. Unfortunately crazy coalition policies and the power that regional satraps and parties have means these volatile policies will never stop.
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Old 20th September 2012, 19:03   #114
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Originally Posted by antz.bin
I am with Harbir on this one. Prior to the Common Rail Diesel revolution of the market (with the first mass market car being the Accent CRDi), it was Petrol which ruled the roost even though Diesels, which were substantially cheaper to run even then, were relegated to use on CVs and Taxis.

Diesels now with their improved power and NVH addressed their old weaknesses using CRDI and in effect converting the market into becoming primarily diesel centric, wherever an option is available. As long as Petrol engines do not hit back at their Diesel counterparts with improved technology, they will continue to remain the 'Also Ran'. The modern EU Direct Injection Turbo Petrol engines are offering exactly that!

If we look at it subjectively, the 1.8 TSI under the hood of a Laura TSI makes more horsepower than a 3.0 D4D in a Toyota Fortuner! AND both cars return similar FE (Laura on highways being much more fuel efficient especially when using 95 Octane.) Taking this forward, the 1.0 Ecoboost engine inside a Ford Ecosport makes equal horsepower to a 1.6 liter CRDi inside a Hyundai Verna. Of course you could argue that the petrols make less torque, but that can always be fixed by using shorter gearing which is much easier to live with on a Petrol than a Diesel due to its wide power-band.

So, when we leveled the playing field, the Diesel engines required 60% more displacement to dish out the same horsepower. This bigger size and weight will make the car itself more expensive to produce.

The low capacity Turbo petrol engines are only starting to show their face in the country now with the only sub 1.5 liter Turbo Petrol engined cars currently sold in India being the Linea and the Jetta, both of which were never high volume sellers to begin with (even with the Diesel variants).

Just imagine what would happen to the sales of a Petrol Swift powered by a 84bhp 875cc Fiat Twin-air engine which returns FE numbers at par with the Diesel Swift but still is cheaper, substantially lighter (due to much smaller block, much less beefy suspension) and more powerful. (Assumptions based on the fact that the 84 bhp Punto TwinAir and the 75bhp Punto MultiJet are rated to return the exact same 68MPG)

Diesel might have the advantage of being the more fuel efficient engine when comparing engines of similar displacement. But when you factor in the fact that it makes horsepower equal to a much lower capacity petrol, how can it still keep its FE advantage?
Antz there are a couple of issues with your argument.

1. The fortuner is 1.5 times heavier than the Laura, the fact that it gives similar fuel efficiency is due to the diesel engine. A more apt comparison would be between the diesel and petrol Laura's.

2. Gdi engines aren't much better with respect to power to weight compared to diesels. So cost will be the same.

3. Modern turbo petrol fuel economies drop drastically if you actually try and use the power. From many Laura owners I know plus reviews of the Fiat turbo petrols internationally.

Cheers

Last edited by Technocrat : 20th September 2012 at 21:32. Reason: Typo corrected on request, thanks
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Old 20th September 2012, 19:28   #115
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

Strangely the oil companies have not declared losses over the last 5 years when they claim that they are loosing crores every day
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Old 20th September 2012, 20:55   #116
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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Strangely the oil companies have not declared losses over the last 5 years when they claim that they are loosing crores every day
They never made any loss - the term used is 'under recovery'.
Eg: They calculated that they will make a profit of Rs 100 in a quarter, but could only make a profit of Rs 75. Won't go into the politics part as that is discouraged on TBHP.
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Old 20th September 2012, 22:11   #117
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Originally Posted by pshyamsundar
Strangely the oil companies have not declared losses over the last 5 years when they claim that they are loosing crores every day
Quote:
Originally Posted by blackasta

They never made any loss - the term used is 'under recovery'.
Eg: They calculated that they will make a profit of Rs 100 in a quarter, but could only make a profit of Rs. 75.
That is not correct.

The oil marketing companies (OMCs) would have made a loss on their marketing operations without subsidy payments from the Government and the upstream oil companies. The 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).

Further, the government does not compensate upstream oil companies' minority shareholders for the portion of the subsidy borne by them, which clearly raises corporate governance issues. And the inability of ONGC et al to realise more than about USD 50 per barrel of crude despite crude prices being at over USD 100 implies a lower market price for these companies (hence lower disinvestment revenues), and also makes projects that would have been viable at market prices of crude unviable - with the result that the future crude output of these companies is less than what it would have been in the absence of these subsidies.

The biggest issue with the diesel subsidy is that it is uncapped - for example, the total subsidy burden is already well above the amount budgeted. Uncapped subsidies, in my view, raise serious constitutional issues - of what purpose is a budget if the government can go and spend 3-4x budgeted amounts on particular item without advance parliamentary scrutiny and approval? Even assuming that subsidies are justified, isn't it only appropriate that these expense items are scrutinised in a manner similar to everything else, and we take a conscious decision that subsidising diesel is the best use of our money - instead of providing universal primary education (the Rs. 160,000 cr. diesel subsidy we were heading towards would be enough to pay the fees for 1 crore kids in a high end school such as Bombay Scottish or Dhirubhai Ambani, and perhaps pay for 5 crore kids at the unaided school I went to) or universal health care (this would be enough to hire 1.6 million doctors at Rs. 10 lakhs per annum each).

So getting back on topic, I just don't see how a skew between diesel and petrol prices that we have seen over the past 2 years is sustainable. It just has to correct, and that should correct the existing insane situation where even people who run just 700-800 km per month buy diesel cars by paying 15% - 20% more than what they would have to pay for an equivalent petrol one.

Last edited by Hayek : 20th September 2012 at 22:32.
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Old 20th September 2012, 23:39   #118
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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?

The Govt. likes to use its propaganda machinery to make you believe that there is a subsidy but it never reveals the amount of taxes that are levied on petroleum products. It is up to you to to figure it out for yourself.

Here is a link to a youtube clip which you give you an idea of the costing of petroleum products. It is a bit dated but the gist of the matter is correct.

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Old 21st September 2012, 08:45   #119
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

ban diesel engines in the passenger car segment altogether in the near future. Turbo charged petrols , KERS etc should be the way forward. Even after this correction if some one still needs the torque wave of diesel cars then he should be made to pay an additional excise duty not less than 2 lakhs and enjoy his drive. I have heard most of the matured automobile markets run on petrol. An excise duty suggested by Kirti Parekh committee of Rs 80000/- should be implemented with a retrospective effect of atleast 3 years.
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Old 21st September 2012, 08:49   #120
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Default Re: Diesel Price Hike - end of the market skew in favour of diesels?

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That is not correct.

The oil marketing companies (OMCs) would have made a loss on their marketing operations without subsidy payments from the Government and the upstream oil companies. The 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.
My intention is not to refute your arguments, but I tried to locate the subsidy payments in the annual results. But could not find any.
For ex, the below for IOC, it shows income from sales and expenses. No sign of subsidy payments.
http://www.iocl.com/download/Indian_...Ltd_280512.pdf
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