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Old 15th May 2012, 18:12   #586
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by selfdrive View Post
That would be theoretically correct. However in our middleman infested transportation system, each layer is lkely to buffer up their profits by using the diesel price hike as an excuse. So eventually the retail price hike impact would not be anywhere in single digits.
Yes, the threat of middlemen making most of every situation always exists. But there has to be a way out.

Firstly I feel Government has no guts to raise Diesel Prices & say by some means if it manages to do so, that will be a great achievement.

Now, if suppose they take possibly the toughest decision to increase Diesel Prices, then they can also ensure that Transporters do not increase fares more than proportionate increase in Diesel Prices. I understand this is not easy in free market economy, but the loot (in name of subsidized Diesel) has to stop sometime & someone will have to take the tough decision.

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Old 15th May 2012, 18:37   #587
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Correct me if I am wrong here, but

1) Isn't it true that corruption is a contributing factor towards the loss ? Is quality being delivered any way ? I might sound bad, but if OMC are not delivering quality, they must be asked to pay back in one or the other terms. It sounds absurd, but the tax payers and end users have paid a lot of price for corruption. This is the only way to deal with govt.

2) Govt. has supported these companies way too much. The employees get benefit like they are kings. Literally. Are we sure that all employees deserve such benefits ? Most of them still carry news papers to read in office, love to do overtime and not work during working hours. People literally have a nap after lunch. How do I know ? Well, IOC has a plant in my city, I have friend's parents working and they tell the story.

3) Much of oil is sold off directly from the plant. This is way too bad and hurting economy. Rather than Rationalizing diesel prices, taxes must be reduced. Agriculture must be taxed, not much, but marginally. Those earning beyond a specified slab must pay higher taxes, but not all.
Also insurance industry must be there for agriculture sector. This way IDT which is too much on fuel can be reduced.

4) The worst part of the story i.e. current inflation is that its already taking its toll on economy. The growth is slowing down, cost of living is threading on unbearable limits. The trasfer of skill will/has also slowed down which will kill economy slowy but the impact can be long lasting. It has taken years to get up and moving, the corruption in our nation can send us to third world again.
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Old 15th May 2012, 18:39   #588
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by selfdrive View Post
That would be theoretically correct. However in our middleman infested transportation system, each layer is lkely to buffer up their profits by using the diesel price hike as an excuse. So eventually the retail price hike impact would not be anywhere in single digits.
Apparently veggie prices have shot up by 61%. So this added hike, thoroughly essential as it is would have to be the bullet we have to bite.

Exactly my thoughts. Everybody in the bureaucracy is trying to find an excuse to put the load on the common man and fill their pockets. Why would they waste such an opportunity?

@Jignesh
I suspect they might increase the diesel prices this time because the govt's tenure will be soon over. Only a middle class man will worry about a hike in diesel prices. The poor will give their vote for 500 Rs and the rich man - well they are the rich men!

Last edited by eyesice : 15th May 2012 at 19:02. Reason: Additional points
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Old 15th May 2012, 20:18   #589
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

As rightly pointed out, the fuel cost in the transportation chain is quite small.

Take a 20ton truck. It costs around 25L, so assuming a repayment of 1000 days the daily cost of principal is 25L/1000 = Rs.2500/day
The interest cost at 6% flat is 1.5L/year ~ Rs 400/day
Driver = Rs.500/day

So fixed costs are Rs. 3K/day. Assuming that the truck works productively for 80% of the time the daily cost = 3,750/day

Now come to fuel
Average = km/L, so for 500km = 125L = 6,250 @ Rs 50
If fuel prices rise 50%, the 500km trip will cost around 3K more
Add to this toll which easily comes to Rs3/km and you get
. Overhead = 3.7+3+other expenses rounded off to Rs.8k/day.
. Fuel @ 50 = 6.25k
. Fuel @ 75 = 9.37k

For a 1000km trip the average time is 2 days, so
For cement that carries 20tons the additional fuel cost is 312/T or less than Rs7/bag of 50kg.

For Tomatoes the truck carries 10T, so extra cost per Ton is 650/ or less than a rupee per kilo of tomato. I am using the long distance as a lot of tomatoes come from Maharashtra to Delhi and are never less than Rs.20/kg.

Lest you think that less tomatoes come in a truck : I have seen them in the Okhla Mandi and they are stacked in crates of about 30kg (they claim 40kg)
5 vertical
10 horizontal
20 longitudinal, or 1000 crates of 30kg in a dual axle 20 ton truck (obvious overloading). In fact the smaller 1 tonners carry 40-50 crates from the Mandi for retailers.
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Old 15th May 2012, 20:42   #590
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

In all these fuel consumption figures above, we assume
1. the truck runs always full (even automen charge more when they see a potential empty-return),
2. good mileage (TN state buses, on GQ roads have a mileage target of 5.5 kmpl at 40-50 kmph. I would assume a 20/25 tonne vehicle returning 2.5-3 kmpl realistically).

If we factor in these two factors, the numbers would increase more (than what we see now).

Further, diesel kind of fuel would have a cyclic impact on inflation (and not one step). For e.g. if diesel prices increase, say first input costs (construction materials, food material, etc ) would increase. Next step would be finished goods (say hotel, flat prices ) would increase. This would trigger wages increase. The last would trigger another input cost (say cost of food production would increase again with increased wages), starting another cycle.

It would be 3-6 months before we fully understand the impact of such a price rise.

In another angle, the subsidy principle has never worked in any economy in promoting efficiency (for e.g. when power is free to farmers, they buy the cheapest pumpset, not the efficient ones OR when diesel is cheap, it makes finance sense to keep an age old truck as opex would be less).

In short, rising diesel price may not be that easy a decision; but less choices are available (with the super greedy taxmen).

PS: All said, I still would prefer diesel to be realistically priced (then leaving the decisions to the elected ones).
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Old 16th May 2012, 09:25   #591
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by babu.sundaram View Post

In another angle, the subsidy principle has never worked in any economy in promoting efficiency (for e.g. when power is free to farmers, they buy the cheapest pumpset, not the efficient ones OR when diesel is cheap, it makes finance sense to keep an age old truck as opex would be less).

In short, rising diesel price may not be that easy a decision; but less choices are available (with the super greedy taxmen).

PS: All said, I still would prefer diesel to be realistically priced (then leaving the decisions to the elected ones).
Actually raising diesel prices, will prompt a lot of operators of old ramshackle vehicles to change to better technology new vehicles, which may result in lower operating costs, and at the same time reduce the total quantum of fuel required to be imported.

Subsidies have generally led to inefficient use of resources, bordering on criminal wastage, as it does not cost much - witness diesel vehicles idling for long time, where as most of the petrol driven ones are switched off (the exception being summers when the AC is on).
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Old 16th May 2012, 09:33   #592
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Completely OT, but some food for thought...
Given the anger and rage that consumes most of us in ref the Indian Government, Politicos, Bureaucrats etc, is there likely at all, to be a revolution here sometime, a la Cuba, Libya, Egypt etc?
Or are we just too lazy to take interest in public affairs and too busy earning our own daily bread and butter to bother about action?
I know we all love to rant and rave, myself not the least, but are we truly capable of getting together as a country and taking our destiny into our own hands, instead of leaving it to the inept, corrupt, short sighted, uneducated characters who have control as of now?
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Old 16th May 2012, 09:39   #593
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

my example of tomatoes may not be accurate here. But there are a lot of items where the cost of increase in diesel will have a very high impact due to cascading effect in the value chain. Cement is not something we use in daily life. But food grains are. Further whatever % is the rise in fuel price, that much % impact is passed down by the truckers (past examples in India).

Let us consider the value chain for rice. Assume a Kilo of rice @ 20 per Kg. There will be increase in the labour wages, water pumping cost incase of diesel pumpsets, fertlizers and paddy/rice transportation cost in tractors/trucks. Impact will be atleast Rs 1/Kg. This will increase cost yearly by Rs 50 per person, assuming a person will eat alteast 1 Kg of rice a week on average. Same with value chain of Milk, vegetables etc (increase in raw material prices grass, fertilizers, labor cost etc), Impact of another Rs 50/person per year. Net if we are considering a family of 4 we are talking impact of close to Rs 400 per family.

Now if you have a family of similar size in a city, they will face additional burden in the form of increased travel cost when using Public Transport. A bus give 5km/liter (APSRTC numbers), running cost of Rs 9/km will increase to Rs 12/km. For a trip of 20kms operator will have to increase fare by Rs 1 just to cover the direct cost increase of Rs 3/km. Assuming a round trip of 20km the net impact of ticket fare increase will be Rs 25/month per person. Close to Rs 300/annum/person.

These are 2 examples where the impact is more or less directly felt. Will majority of India be able to bear the burden of the price Hike is the question.

I am all for making Diesel at par with market prices. But before that we need to have a system so that people with maximum direct impact are given a way out for atleast short while.
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Old 16th May 2012, 09:50   #594
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by shankar.balan View Post
Completely OT, but some food for thought...
Given the anger and rage that consumes most of us in ref the Indian Government, Politicos, Bureaucrats etc, is there likely at all, to be a revolution here sometime, a la Cuba, Libya, Egypt etc?
Or are we just too lazy to take interest in public affairs and too busy earning our own daily bread and butter to bother about action?
I know we all love to rant and rave, myself not the least, but are we truly capable of getting together as a country and taking our destiny into our own hands, instead of leaving it to the inept, corrupt, short sighted, uneducated characters who have control as of now?
In a country where most do not come out to even utilize the basic rights of voting, i doubt if anyone will even think of this. They are more concerned on their today's living rather than tomorrow.
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Old 16th May 2012, 09:54   #595
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Unhappy re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by Aroy View Post
Actually raising diesel prices, will prompt a lot of operators of old ramshackle vehicles to change to better technology new vehicles, which may result in lower operating costs, and at the same time reduce the total quantum of fuel required to be imported.
Sorry!, it should have been Capex. Thanks for pointing it Aroy..
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Old 16th May 2012, 10:03   #596
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Reading this thread I cant help but think of the case of sour grapes. Its unfortunate to see bhpians with petrol cars advocating against diesel subsidy in a country where public transport is in a sad state. Diesel is not really being subsidized, rather its ideally priced. If I am the govt, and I have state run PSU's. I see for every litre of diesel I charge excise, state tax that amounts for nearly 15-20 Rs than than I subsidize the fuel by 10 Rs by paying money to the oil PSU's, am I really giving subsidy?

I would rather we spend more time and energy discussing that Petrol should be taxed less than discuss the misnomer of diesel being subsidized where in essence is just not how some folks would want you to believe.
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Old 16th May 2012, 10:09   #597
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by shankar.balan View Post
Given the anger and rage that consumes most of us in ref the Indian Government, Politicos, Bureaucrats etc, is there likely at all, to be a revolution here sometime, a la Cuba, Libya, Egypt etc?
Or are we just too lazy to take interest in public affairs and too busy earning our own daily bread and butter to bother about action?
I know we all love to rant and rave, myself not the least, but are we truly capable of getting together as a country and taking our destiny into our own hands, instead of leaving it to the inept, corrupt, short sighted, uneducated characters who have control as of now?
A revolution in India is most improbable. We are too large and too lazy. Any Keynesian economist will buy off the masses with a few sops, and they will not realise that they may be paying for these later. For our chosen ones, sixty year old cartoons and keeping Mamata happy are the burning issues.
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Old 16th May 2012, 10:54   #598
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by shankar.balan View Post
Given the anger and rage that consumes most of us in ref the Indian Government, Politicos, Bureaucrats etc, is there likely at all, to be a revolution here sometime, a la Cuba, Libya, Egypt etc?
Hello Shankar,

I do think revolution like in thouse Countries is possible in India.

Most of the citizens here are busy fighting for clean water, food & modest lifestyle & their entire life passes by doing these things.

Also Indian people are suppressed & used to this style of living since centuries & in their mind "Sarkar" is next to God.

Thanks,
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Old 16th May 2012, 12:31   #599
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Highest & Cheapest Gas Prices by Country: Pain at the Pump - Bloomberg

This is an interesting article from Bloomberg about Petrol . Pain @ pump concept makes me think, Petrol is the only point by which Government can collect taxes from everyone uniformly according to consumption. Hence taxed so much.
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Old 16th May 2012, 13:01   #600
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by sgiitk View Post
A revolution in India is most improbable. We are too large and too lazy. Any Keynesian economist will buy off the masses with a few sops, and they will not realise that they may be paying for these later. For our chosen ones, sixty year old cartoons and keeping Mamata happy are the burning issues.

@Mods: Forgive me for this OT response but the context is relevant.

Once when India was still a "socialist" state in the late 70s', a relative who had migrated to the United States visited our house on his ritual visit to the home country. He very loudly and forcefully proclaimed in his "gai kaa bacha" accent how India was headed towards a revolution.

To which my late father responded replied with a yawn "Revolution is a concept alien to the Indian psyche. Leave alone the general population even the communists here are great fatalists. People are content to ascribe most things to fate and carry on with the drudgery of their mundane existences"

As mentioned in the post I am responding to, the opiate of sops is used to great effect by the neta-babu combine to follow perverse policies which while "socialist" or "socially desirable" on the surface have a simple focus - enrichment of the power elite. It is only when we are faced with a catastrophe of epic proportions which threatens the very existence of the power elite do we get change in India - witness the onset of liberalisation when our Hon'ble PM was the then Finance Minister. India was bankrupt and was out with a begging bowl in the corridors of the multilateral lending institutions. It was then the power elite felt their survival was at stake and changed their ways. The same scenario will repeat itself with respect to the energy policies of the GOI. It is only then, we will see an energy policy that stands the test of economic good sense.

My rant is over. Thank you for reading.

Last edited by RS_DEL : 16th May 2012 at 13:03.
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