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Old 5th August 2011, 22:42   #211
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by misquitas View Post
Others may not agree to my calculations, but it makes perfect sense to me and more importantly, it makes me happy.
Nice, crisp and clear calculation! Might open eyes of some smart diesel buyers. I know people who drive less than 1000 kms a year and still go for diesel just looking at the price difference per liter. I can fully understand the economic rational for a person with, say 5000 kms a month, but I bet less than half diesel car buyers in our country drive enough to make sense.
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Old 5th August 2011, 23:01   #212
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Diesel always scores in resale value compared to petrol.These calculations will always favour petrol cars on paper but diesel cars sell more even if you look at sales of BMW 3 series ,5 series or the equivalent models!
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Old 5th August 2011, 23:04   #213
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Its difficult to de-regulate diesel prices for passenger vehicles while still subsiding the fuel for commercial vehicles.

Either way i care less, coz I have stopped using my car.
Now am happily using AC Volvo service for everyday office to-n-fros.
The car sits around gathering dust till the weekend, when it wakes up to be used for jolly rides to amuse my queen and princess.

Last edited by WindRide : 5th August 2011 at 23:08.
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Old 5th August 2011, 23:05   #214
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by SunilM View Post
Nice, crisp and clear calculation! Might open eyes of some smart diesel buyers. I know people who drive less than 1000 kms a year and still go for diesel just looking at the price difference per liter. I can fully understand the economic rational for a person with, say 5000 kms a month, but I bet less than half diesel car buyers in our country drive enough to make sense.
Thanks. It is true that many of my friends and relatives have diesel cars, but hardly accumulate 12,000 kms each year. My bro-in-law has a Ritz LDI and has done only 20,000 since May 2009. A relative has done about 30,000 in his Swift LDI in 4 years. Many are under the impression that there are huge savings in a diesel car -- and likewise, huge expenditure in a petrol car -- without even considering the amount of kms covered per year.

I too feel that a large number of diesel car owners may not be exceeding 15,000-20,000 kms in a year. The Rs 80,000 initial price difference between a petrol and a diesel car, and the savings from that amount invested, does make a significant dent in the benefits of a diesel car.

@damodar:

It may be true that diesel cars have a better resale value, especially among higher end cars, but I'm basing my calculations on Rs 4-6 lakh cars.

While the diesel car may have a better resale even in the Rs 4-6 lakh range, I will still have that Rs 80,000 (initial saving) with me, when I decide to upgrade my car 5-6 years down the line.

On the other hand, you could also argue that I would have saved Rs 15,000 each year in running a Ritz LDI and I would also have had Rs 80,000 at the end of 5 years.

In either case, as I see it, real benefits of having a diesel car for me would lie after 5 years. I don't think I would want to keep a car beyond 5 years and hence, going by my current km usage, a diesel car just does not make sense to me within these first 5 years.

Last edited by misquitas : 5th August 2011 at 23:28.
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Old 5th August 2011, 23:38   #215
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by SunilM View Post
Nice, crisp and clear calculation! Might open eyes of some smart diesel buyers. I know people who drive less than 1000 kms a year and still go for diesel just looking at the price difference per liter. I can fully understand the economic rational for a person with, say 5000 kms a month, but I bet less than half diesel car buyers in our country drive enough to make sense.
Let me put my calculation. I own a VW Vento TDi Highline bought in April 2011.
At the time of booking in Dec 2010 the Honda City VMT costed 9.13 Lac Ex-Showroom and VW costed me 9.13 lac for the TDi Highline.
So whats the difference I paid nothing, a big zero, so who is smart?
Because of competition Honda decreases prices of city by Rs. 66,000, in the name of localization, so is City still very much have the same quality as previously or has it decreased with localization, no idea, no one has.
But in the end I would like to say that GOI should remove the subsidy from Diesel forever, but how are they going to provide diesel to the sector which needs subsidy.
If GOI prices diesel differently for different sectors than it would lead to more corruption. Buying diesel cheap with subsidy and than selling to other party which doesn't get subsidy.
We all over here keep on flaming each other, why me why not you; but where as the old babus and bureaucrats sitting in their chair frame rules and we just nod our heads and so as they say.
Try to change the system and not become as the system wants us to be. We need more Anna Hazare.
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Old 6th August 2011, 00:02   #216
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

If I did the maths, I would not own a car at all. 5000km a year.

Almost certainly cheaper to take autos and call taxis (and, of course, healthier to walk the shorter journeys <Blush>). Possibly less safe. My perception is that my own driving is safe: I don't state it as fact.

So, car ownership, for me, is a luxury and a convenience. On top of that, I choose the diesel driving experience.

However, I have to confess to a certain amount of financial fallacy too:

--- I always enjoy the lower cost of a tankful of fuel.

--- I know, that in the bigger picture of the car budget, this is an illusion!
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Old 6th August 2011, 00:52   #217
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

It is all about your perspective of how do you want to look at things, 'glass half empty/full theory'. Here's my 2 cents:-

I have a budget of around 7 Lakhs to purchase a car. I have 2 options, 1) Swift ZDi 2) Pre-worshiped Civic. I can get both of these cars in this budget. My annual running is about 18000 Kms.

1) With the Swift ZDi @ an avg of 20 Kpl I will consume about 900 Lts in a year. At the current price of diesel at say Rs 45, the total expenditure will be Rs 40,500/Year.

2) With the Civic (pre-worshiped) @ an avg of 10 Kpl I will consume about 1800 Lts in a year. At the current price of petrol at say Rs 64, the total expenditure will be Rs. 115200/Year. That's Rs 74,700 more than option 1 per year or Rs 6225 more per month

Grave difference and big enough to put me in a 'grave' as well. Some of you will say why compare with a car from a different segment. Basic human nature, I will always want a bigger car for the same money if I can get my hands on it. I would have bought the pre-worshiped Civic, for that is my dream. But given the condition of prices of petrol and diesel this calculation tells me to stay 'far away' from it.

See it is all about how you look at things, and the diesel deal will always be sweeter. It is just another perspective and there are so many people out there in the world who will have a 100 different perspectives and reasons to buy a diesel vehicle over a petrol one. This was but one example and a very logical one at that.

So for me right now it does make a difference, a positive one, if the diesel subsidy stays for a longer time. However if tomorrow diesel and petrol come at par, then we don't have a choice, yes I would like to go for a petrol car for the refinement and lower maintenance hassles. But then again maybe the better mileage that diesel cars give will again put some calculations on the board.

I see a lot of people say ' I bought the petrol version which was Rs XYZ less than the diesel variant and I am going to break even after XYZ years and save so much'. The question that comes to my mind is, why not buy a diesel version of a car from the lower bracket and save even more in those XYZ years, if saving is all that you are looking at. I am only trying to find some logic here, is it saving that you want then buy diesel from a lower bracket and save. No, you actually want more car for your budget, human nature, but you want to peg it against a car(diesel) that is even more than your budget and then calculate savings. No offence to any one, but I do not see logic here, or is it just another perspective, food for thought

P.S. This is just a personal opinion and no offence or harm is intended to the people on this forum or otherwise. Just dropping a few words in the ever expanding pool of knowledge in hope to learn some from it.
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Old 6th August 2011, 09:58   #218
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

The Petroleum Ministry says the removal of subsidy for luxury diesel cars is being studied. They say the subsidy which is intended to benefit certain classes is being misused by using the fuel in luxury cars.
The amount of subsidy incurred on total sale of diesel - Rs.53,000 crores per annum.

Percentage of diesel used by all cars (not luxury cars alone) - 15 %.

Industrial Use :- 10%

Railways :- 6%

Agri related :- 12%

Electricity generation - 8%

Buses :- 12%

Trucks :- 37%

What is the quantum of subsidy - Rs.6.82/litre.

However, other major consumers of diesel are shopping malls/theatres/industries/cellular phone towers which employ diesel generators when electricity fails. These too will have to pay higher price for diesel if the proposal comes through.

Obviously, agriculture, public transport, goods transport sectors will get subsidized diesel.

It is not clear what class of cars will be considered luxury class.

The Rediff report that the small car maker rejoices at the news of propsed dual pricing of diesel is premature. The new report says it is for luxury cars alone. The bench mark may be sub 4 metre ones.

Also, Corporates who run transport services for their employees - though it comes under the category of bus, will they be eligible for the subsidy.

Issues are a lot more and a lot more important than those few I have mentioned.

Implementation is a big concern and how much would it cost the Ministry to implement and monitor the dual pricing is to be taken into consideration.

In my opinion, it may be better, at this juncture, to offset the under recoveries (atleast partially) to charge the diesel cars (categorizing them) quarterly/half yearly/annual tax which can be easily implemented. Other diesel consumers like malls/towers etc too should be brought under a similar mechanism.

A combination of partially reducing the quantum of subsidy and charging taxes on a regular basis for diesel consumers would help.

Raising life taxes for diesel cars shouldnt be a priority as we are looking at cutting out the subsidy to undeserving class of consumers but not against the diesel technology as a whole.

Last edited by simplyself : 6th August 2011 at 10:01.
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Old 6th August 2011, 10:14   #219
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by simplyself View Post
The Petroleum Ministry says the removal of subsidy for luxury diesel cars is being studied. They say the subsidy which sel consumers would help.

Raising life taxes for diesel cars shouldnt be a priority as we are looking at cutting out the subsidy to undeserving class of consumers but not against the diesel technology as a whole.

Trust the GOI to bugger up every damn thing it touches!!!!!!!

The cure is worse than the malady. So whats bloody new?

Newer avenues for the NB ( neta-babu ) combine to make money coming up!!!!!!

Why can the UID database being setup by Nilekani & Co not be used to disburse the subsidy to a very narrow segment which is truly deserving ( I would much prefer the damn subsidy is done away with altogether but the inflation scare mongers are not going to let it happen). Even the goods transport sector needs to be made to pay market prices for diesel. Let the impact come into the final pricing of goods we buy and sell. Then see the inflation picture. That is going to remain a pipe dream, I guess .

As they say the more things change the more they remain the same!!!!!
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Old 6th August 2011, 10:51   #220
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Atleast in many countries in europe, they have differential pricing for diesel. Basically colour coded diesel for agri use and vehicles. In corrupt India, things can never be perfect, but this can start as a starting point. With stringent checks and heavy penalty on pumps/individuals, this seperate price can be tried in the beginning. But if you ask me diesel subsidy has to be non-existant for private car owners. If a guy can buy/bought a car at 5 lakhs, he should do so if he can afford the running costs and fuel. Take a leaf from singapore, the taxation for private cars are ~120% and week end cars are 50% of the ex showroom price. Needless to say, my country manager for Singapore goes to office in a Taxi. he can't afford a car.
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Old 6th August 2011, 13:38   #221
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

^^ Agreed. The neta-babu nexus isbleeding the country dry and their scatterbrained "solutions" often serve to compound the problem rather than alleviating it.

Why is using diesel in luxury cars or in genertor sets a "misuse" of the fuel? It's a perfectly legitimate use for it, in my opinion. It is the government's decision to price diesel the way they have, so blaming people for fuelling their Mercs and BMWs with diesel is just silly.
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Old 6th August 2011, 14:08   #222
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A number of people on this thread have tried to claim that the government is mis-representing facts when it talks of fuel subsidies since the centre and states also levy taxes on fuels. For example,

Quote:
Originally Posted by souravc

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 .

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)
There has also been the view expressed that the diesel subsidy is not very large. I would like to refute both these points of view. (Sorry if some parts seem off topic or obvious but they are needed to build my case)

India is a country that runs extremely large deficits, almost 50% of government spending is financed through deficits. Our ability to collect direct taxes is low - only the salaried pay fully, and peak tax rates at 30% are very low compared to other countries. (eg. In the UK, people pay a peak rate of 50% + a surcharge for the NHS). Hence we depend on indirect taxes for the bulk of our tax revenue. The standard rates of indirect taxes are 12% CENVAT, 12% State VAT and 4% Octroi (in Bombay). These taxes are levied on most items ( barring fresh produce), and there is no reason why fuels should be exempt from them. In most parts of the world, additional levies are imposed on fuels to compensate partly for the cost of road maintenance, and for the negative externalities such as pollution and global warming caused by burning them. Not levying these taxes on fuels like diesel implies an increase in deficits or higher taxes in future. The government needs to choose whether it should spend money on diesel subsidies, or on primary education, basic healthcare et al.

So what should the price of petrol and diesel be in India without subsidies? It should reflect the international price of these fuels, plus normal indirect taxes on par with basic commodities, plus surcharges for road maintenance and the cost of pollution / green house gas emissions. In most countries, fuels are also taxed at above average rates since evasion of fuel taxes is much tougher than evasion of other taxes. For the international price of fuel, I have worked off petrol and diesel prices in the US, which does not levy indirect taxes or green house gas surcharges. Last month, these were around USD 3.8 per gallon for petrol and USD 4 per gallon for diesel. (viz Rs 45 per litre and Rs 47.5 per litre respectively). Burning one litre of petrol leads to the emission of 2.32 kgs of CO2, for diesel, the figure is 2.66 kgs. (yet another myth busted, burning one litre of diesel leads to higher carbon emissions than one litre of petrol). Working off a price of USD 30 per tonne of CO2 adds Rs. 3.13 per litre of petrol and Rs. 3.59 per litre of diesel. Add Rs. 2 per litre of petrol and diesel for road work and the standard indirect taxes and we get to Rs. 65.4 per litre of petrol and Rs. 69.3 per litre of diesel. The current prices in Bombay are Rs. 68.5 for petrol and Rs. 45.5 for diesel, viz petrol is over taxed by Rs. 3 per litre, while diesel is subsidised by Rs. 24 per litre.

Given that diesel consumption in India is about 80 billion litres per annum, the diesel subsidy is USD 42 billion each year when accounted correctly. To put this in context, the total tax revenues of the GOI were about USD 210 billion last year viz 20% of GOI revenues are spent on the diesel subsidy. (assuming oil prices stay at current levels). I don't think anyone would have consciously decided on such a large subsidy for transport fuel - the only reason it exists is because it has crept up by stealth without anyone noticing it, and accounting for it correctly.

So for those who are buying diesel cars assuming this subsidy will last forever, be warned. India can't afford this, and it's a matter of time before the government revises this disastrous policy - either of it's own accord or because a financial crisis forces it to do so.

Btw, relative to the cost of this subsidy, the proposed policies of levying higher taxes on diesel car sales amount to scratching at the surface. Even if a million diesel cars are sold in India and the government levies a surcharge of Rs. 90k per car, they would recoup just USD 2 billion, or under 5% of the diesel subsidy - in fact this would be just one third of the diesel subsidy on passenger cars.
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Old 6th August 2011, 14:12   #223
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by noopster View Post
^^ Agreed. The neta-babu nexus isbleeding the country dry and their scatterbrained "solutions" often serve to compound the problem rather than alleviating it.

Why is using diesel in luxury cars or in genertor sets a "misuse" of the fuel? It's a perfectly legitimate use for it, in my opinion. It is the government's decision to price diesel the way they have, so blaming people for fuelling their Mercs and BMWs with diesel is just silly.

Not scatter brained in the least!! Will excel from a perspective of perverseness.
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Old 6th August 2011, 14:48   #224
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Well the breaking news it that S&P has downgraded US economy from AAA to AA+ - its a watershed event which should lead to severe negative reaction and downgrading of world's growth expectations and consequently slackening of commodity prices including crude . If the government is honest about its publicised intentions then they should prepare the grounds for a complete de-regulation of fuel prices taking advantage of the situation. To re-iterate it should be complete de-regulation rather than any pockets being created .
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Old 6th August 2011, 15:13   #225
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

I bought a diesel car not because of any long term pecuniary benefit. But I like a heavier car more than a lighter one and yes, I am a sucker for fuel efficiency too. My perception has always been that when the weight of the car is more than a tonne, a petrol engine struggles to give more than 12 kmpl while a diesel engine easily gives 18 kmpl or more. Finally, I hate to see the fuel tank empty midway through a 600 km long road trip.

Even if diesel sell at a price equal to that of petrol, my next car will again be a diesel, unless I lose all my urges for long drives. In the latter case I'll be fine with my father's Nano!
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