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Old 4th August 2011, 19:23   #166
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Default Re: Gov't considering tax hike on diesel cars

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Originally Posted by vinya_jag View Post
Lets do some math here:
If diesel is desubsidized, then an increase of 15 rupees per liter. It would be available at Rs 60 per liter. Which is still cheaper than petrol by ~10 rupees and fuel efficient yet.
If diesel subsidy is removed, price is likely to increase by about 6 Rs. The government gives a subsidy of Rs 6.08 per litre on diesel as per the ToI article.

One really interesting statistic from the government is the breakup of diesel use in India. Cars are the second highest consumers for Diesel in the country and the rate at which new diesel cars are being added, it could soon enough be number one. That clearly indicates that subsidizing Diesel is just not possible in the long run. Upfront tax on Diesel cars may also not work - afterall there are other big users also, you cannot increase tax on all buses and trucks. With GST it will be even more difficult. The only solution is to increase the Diesel prices.

If you look at the table below, the only category government cares about subsidizing is Agriculture at 12%, rest 88% subsidy is misuse as far as government is concerned (and rightly so, IMO). They will find a way to help agriculture sector and increase rates for the rest. After all subsidy money has to come from somewhere and why should my tax money pay for the diesel of an 60L X5 or running AC in a mall or a cell phone tower!
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Last edited by SunilM : 4th August 2011 at 19:41.
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Old 4th August 2011, 19:28   #167
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Default Re: Gov't considering tax hike on diesel cars

I am all for this move. The subsidy on diesel was given for a purpose which is not being fulfilled.
Conditional diesel rates will be impossible to implement and the guy benefiting most out of this exercise will be the diesel pump attendant through the sau-pachaas most people will shamelessly put forth to get cheaper diesel at commercial rates. But then, isn't that the story of India. For every "good on paper" scheme that the government launches, we find a way to circumvent it and then conveniently cry that corrupt leaders are sucking our blood.

The only viable solution in my opinion
Tax the diesel cars more initially. Especially so at the higher end as i don't wanna pay higher cost of petrol so that the diesel SUV guy can own the road.

The dream scenario
Everyone gets slab based diesel/petrol rates according to there UID-Aadhaar number . So the poor guy pays less. The rich SUV guy pays more. No nitpicking please. Just an innocent thought.

Do i sound like a communist
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Old 4th August 2011, 19:31   #168
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Default Re: Gov't considering tax hike on diesel cars

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Originally Posted by vinya_jag View Post
Lets do some math here:
If diesel is desubsidized, then an increase of 15 rupees per liter. It would be available at Rs 60 per liter. Which is still cheaper than petrol by ~10 rupees and fuel efficient yet.

Lets average this:
Efficiency P - 14/L (Highway + City combined)
Efficiency diesel - 17/L (Highway + City combined)

Running cost P - 5.14 Res/Km
Running cost D - 3.53 Res/Km


Yearly running cost - 15K Kms
P- 77K
D- 53K

So if you are buying the car without loan and at a 1.25 L premium over the petrol, you would need little less than 6 years to make up your money

And if you are buying it on a loan period of 5 years, then you would probably end up paying ~ 2 lakhs interest included, and thereby whould need umpteen years for your diesel car to lay egg.

If you Wait and watch (But if the diesel prices remain subsidized and the car price rise (read tax), then you would curse yourself on not acting fast and buying the diesel.
But in all cases, this is going to happen in the next few years. (One thing or the other)

My suggestion:
Drive both cars. If you love driving the diesel for its mid range torque, buy that.
If you like the free revving petrol and its quietness, buy the petrol

Forget what amount of money you save and enjoy your car.

I did the same calculation and bought a diesel (even though I was barely breaking even) - a week later govt. increased petrol prices

Now that the price paid for the car (the 1L difference) is sunk cost (money not coming back no matter what I do), even if petrol prices match diesel prices I love my diesel


One saving money - seriously guys do yourself a favour and do some more calculation - for low to medium mileage users Meru taxis are FAR cheaper than any petrol//diesel will ever be - simply because those guys actually use the car , unlike you car that remains in the parking. Of course when I put the obvious maths (at 5000km/year I would be spending less than 1L/year - for a Chauffeured car - and I don't pay insurance etc.) in front of my wife - I was told to shut up and buy a car.


On enjoying your car - I agree with your advice, on the other hand this is not really the advice people want to hear when they are discussing fuel prices.
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Old 4th August 2011, 19:35   #169
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Default Re: Gov't considering tax hike on diesel cars

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Originally Posted by souravc View Post
Thats a very valid point you made ! We choose to be ignorant and deserve to be taken for a ride by the politicians



Brilliant ! Thats recipe for creating a black market, more corruption . Anyone selling an old dilapidated truck for less than 50K (a few Shaktiman's would be available), I am a buyer - all diesel purchases would be done in the name of truck .
Either decontrol diesel prices but please - no conditional decontrol . We have enough of corruption to deal with

In the messages you and I exchanged on the subject on earlier occasions we broadly concurred on the anticipated direction.

The only place I will differ from you is on the simplistic arguement viewing fiscal levies and and under-recoveries as a sleight of hand intended to fool the citizenry. Like it or not, the taxes are what they are - taxes and the OMCs' are independent entities which may have majority stakes by the government but are stand alone entities as distinct from the government. Following from this it is logical that the OMCs' will keep their own books and their revenues and profits/losses are theirs ONLY.

If private sector entities also vend fuel at the retail level they will face the same under recoveries as the PSU OMCs' are facing. Taxes levied at the point of customs and excise and sales taxes can not be confused as money going to the OMCs'.

Yes I agree with you if decontrol has to happen, then it HAS to be complete decontrol not some sorry midway solution which creates more problems than it solves. Also if the government wishes to allow the OMCs' the freedom to charge a price that enables them to earn a profit then it should be made mandatory for the OMCs' to modernize their refineries to produce ULSD.

Last edited by RS_DEL : 4th August 2011 at 19:40.
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Old 4th August 2011, 19:53   #170
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by mahadev_kc View Post
Few cents from my side:

For All diesel vehicles except farm-tractors, railways, state owned transport buses, put an yearly tax of Rs 20000=00 or 30000=00 and collect

will fear of traffic police. If found that no insurence, minimum fine is Rs 500. So, increase this fine too to 5000.
Your idea my friend maybe simple but is quite effective and has ease of implementation to an extent.

However I can assure you of one thing, with this idea you will make more enemies than friends on this forum. That is the problem with people who are used to living off government handouts - they make all kinds of meaningless arguements and very loudly at that.
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Old 4th August 2011, 20:10   #171
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Quote:
Originally Posted by souravc

Thats a very valid point you made ! We choose to be ignorant and deserve to be taken for a ride by the politicians

Brilliant ! Thats recipe for creating a black market, more corruption . Anyone selling an old dilapidated truck for less than 50K (a few Shaktiman's would be available), I am a buyer - all diesel purchases would be done in the name of truck .
Either decontrol diesel prices but please - no conditional decontrol . We have enough of corruption to deal with
The best way forward would be to have different variants of diesel for cars and trucks and make sure that they are incompatible with each other. That is a big ask and all automobile manufacturers have to instructed to follow the fuel specs.
The question is does the government have the will and desire to do that.
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Old 4th August 2011, 22:55   #172
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

What about the politicians? Do they continue to be subsidised by us?

I'm all for diesel price de-regulation and am willing to take that hit. Keep subsidies only for those that can prove it is for agricultural use only BUT i will not pay my taxes for our politicians to mooch off my money.

As for the agricultural use..why not extend the current all India ID system being implemented to specifically indicate the farming community. Depending on the magnitude of the farm (or any measurable aspect) subsidised diesel can be allotted every month/year to them. The rest can pay the market rate.
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Old 4th August 2011, 23:02   #173
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Default Re: Gov't considering tax hike on diesel cars

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Originally Posted by souravc View Post
Brilliant ! Thats recipe for creating a black market, more corruption . Anyone selling an old dilapidated truck for less than 50K (a few Shaktiman's would be available), I am a buyer - all diesel purchases would be done in the name of truck .
Either decontrol diesel prices but please - no conditional decontrol . We have enough of corruption to deal with
You could see what the future is, but most people are incapable to think on similar lines and would only realize it after the mess is created.
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Old 4th August 2011, 23:18   #174
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Default Re: Gov't considering tax hike on diesel cars

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Originally Posted by SunilM View Post

If you look at the table below, the only category government cares about subsidizing is Agriculture at 12%, rest 88% subsidy is misuse as far as government is concerned (and rightly so, IMO). They will find a way to help agriculture sector and increase rates for the rest. After all subsidy money has to come from somewhere and why should my tax money pay for the diesel of an 60L X5 or running AC in a mall or a cell phone tower!
If diesel prices goes up, the cost on transportation of goods goes up or in other words, Inflation would easily cross 10%!

When the country is growing at 6% and inflation is hitting 10% for the common man (Aam aadmi), the country is growing at negative 4%!

The 15% cars include a major chunk of taxis. When the cost of diesel for Buses, Trains and Taxis go up. Cost of travelling goes up and so would the cost of living.

Also your concern is totally off track as nobody's tax money is used for subsidy!. Please don't let the politicians take you for a ride, there is absolutely no subsidy in any fuels! There are talking about revenue losses by cutting the huge tax levied on diesel!

Still don't believe me, check the balance sheets of oil companies and see how many times have they gone red even after they being one of the best in salaries and perks. Or simply check how much is the cost of a liter of diesel/petrol for these companies, including importing, refining, marketing and profit.
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Old 5th August 2011, 00:18   #175
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Default Re: Gov't considering tax hike on diesel cars

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Originally Posted by RS_DEL View Post
In the messages you and I exchanged on the subject on earlier occasions we broadly concurred on the anticipated direction.

The only place I will differ from you is on the simplistic arguement viewing fiscal levies and and under-recoveries as a sleight of hand intended to fool the citizenry. Like it or not, the taxes are what they are - taxes and the OMCs' are independent entities which may have majority stakes by the government but are stand alone entities as distinct from the government. Following from this it is logical that the OMCs' will keep their own books and their revenues and profits/losses are theirs ONLY.

If private sector entities also vend fuel at the retail level they will face the same under recoveries as the PSU OMCs' are facing. Taxes levied at the point of customs and excise and sales taxes can not be confused as money going to the OMCs'.
Its about semantics - instead of saying that diesel is being subsidised, which it is not , the government can cringe about lost taxes. The diff is as simple as squeezing out less profits and taking pity on diesel users. Thats why the term used is "under recovery" and not "loss' , "write-off'. So the term being used is being played around by the government .

Do you seriously believe that the PSU OMCs are so independent of the govt? I would disagree with you , I have dealt with PSU companies as part of financial market transactions and have some insights into how their dividend policy is determined, capex decided , pricing decision , etc. Govt actively uses them as a lever to control prices and controls them through appointment of the Chairman .

I think you have missed the point being made here - no one is subsidising diesel , its just that govt is robbing from one pocket (OMC) to fill up the other pocket ( tax, levies)

Private Sector prices are fully de-regulated , they are not bound to retail at the govt determined rates. Reliance tried to act smart and claim subsidy from the government for petrol and diesel (prior to deregulation) - they were clearly told that they were welcome to sell at any price they wanted to . So they do not need to face under recoveries - albeit i doubt whether they would be able to sell given the difference in prices .
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Old 5th August 2011, 10:17   #176
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Petrol has been deregulated , but still carries 50% tax.Earlier situation was that govt will pump some percentage of tax money as subsidy to Oil companies In effect reducing the total tax revenue.Deregaulation ensures that the tax is with the govt. Where does this money go ?Are they using it for infrastructure upgrade ? NO. All highways are constructed with Toll booths and the private sectors are generating a huge money from this.Eventually it all goes into the hands of corruptors .
This will show that lots of tax is collected and the country's economy is booming and the govt fulfills its economic growth predictions.In effect the poor people will be suffering.
If the fuel is given subsidy just think that it is taxed less
Govt has plans to revoke the subsidy of Cooking gas for a certain income class (read middle class).This will shoot up the cost of living. Employees and workers will demand more including those from govt sector. I have read some where that companies shifting operations to their homeland because of rising operating costs in India.
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Old 5th August 2011, 10:27   #177
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Default Re: Gov't considering tax hike on diesel cars

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Originally Posted by channelv View Post
When the country is growing at 6% and inflation is hitting 10% for the common man (Aam aadmi), the country is growing at negative 4%!
.
This is not true as far as I know. GDP growth does factor in price rise before giving us growth figures. So 6% is 6% after inflation and not before (learnt this in economics,some economics guru here please correct if I'm wrong)
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Old 5th August 2011, 10:53   #178
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

The worst thing to do is to have dual pricing.

Current usage pattern:
Cars 15%
Others 85%

Post dual pricing:
Cars 5%
Others 95% or may be even more!

Cartels will rule and everyone will start siphoning off the diesel at cheaper prices.

The only way to solve this is upfront tax for new diesel cars and some form of cess for existing cars.

-Karthik
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Old 5th August 2011, 10:56   #179
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by vina View Post
One saving money - seriously guys do yourself a favour and do some more calculation - for low to medium mileage users Meru taxis are FAR cheaper than any petrol//diesel will ever be - simply because those guys actually use the car , unlike you car that remains in the parking. Of course when I put the obvious maths (at 5000km/year I would be spending less than 1L/year - for a Chauffeured car - and I don't pay insurance etc.) in front of my wife - I was told to shut up and buy a car.
@vina: I am sure most of us buy a car more for the convenience and fun factor than solely for its cost vis-a-vis alternate modes of transport (ricks/ meru cabs etc). I dont know how many Meru cabs would uncomplainingly take multiple pit stops and wait while we shop for example.

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Originally Posted by commodore View Post
What about the politicians? Do they continue to be subsidised by us?
As for the agricultural use..why not extend the current all India ID system being implemented to specifically indicate the farming community. Depending on the magnitude of the farm (or any measurable aspect) subsidised diesel can be allotted every month/year to them. The rest can pay the market rate.
Yes, the political class will continue to be the leeches they are. Why else would people want to get into politics. We wont find one person who is in it genuinely for serving people or developing the country. They are in it either for snob value/ acceptance (zondabad brigade) or for monetary aspects or due to political lineage. If there is only a simple basic law that politicians have to take public transport and cannot drive in cars, you will see at least 50% of them disappear. Lets not even get into their other perks!
As for the farming and public distribution/ transport sector, why can they not be made to pay normal rate as other users and then asked to claim refunds via IT returns subject to maximum cap/ limit? It wont be any different from salaried employees submitting their medical bills, would it?
This would probably increase some admin work, but we are not short of people are we? Also, it would ensure that tax returns are completed each year diligently.

Quote:
Originally Posted by PuntoMania View Post
This is not true as far as I know. GDP growth does factor in price rise before giving us growth figures. So 6% is 6% after inflation and not before (learnt this in economics,some economics guru here please correct if I'm wrong)
I am not sure of this as I was most probably dozing off or talking to someone during my economics class. If this is correct, then the projected GDP growth will always take a hit as the inflation is always rising more than the initial projections.
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Old 5th August 2011, 11:17   #180
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

How would they actually track the usage of diesel with this dual pricing? This policy, IMO is making ground for more corrupt practices.
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