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Old 24th May 2012, 21:39   #631
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Hello,

Just heard on Times Now that seeing the protest after Petrol Price hike, Government has put-off Diesel & LPG price for next two weeks.

This is exactly what I felt since long time. I am sorry to mention this point again, but this is fact - No Political Party will dare to talk of Diesel Price hike before 2014 elections.

Petrolheads get ready to face tough times ahead & Diesel Prices rationalization will remain a dream for next 2 years.

Sorry for being cynical but this is what is visible currently.

Thanks,
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Old 24th May 2012, 22:26   #632
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by Jignesh View Post
Hello Volkman,

Petrol is not contributing to falling Rupee or India's Subsidy bill.

Actually it is Diesel that is contribution to high Balance of Payment (& so falling Rupee) & obviously increasing Subsidy Bill.

...
While diesel (and to a far larger extent kerosene and LPG) has surely contributed to the subsidy bill, it beats me why would petrol not be a culprit for balance of payment problems. Can you elaborate on that part?
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Old 24th May 2012, 22:37   #633
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Even-though it was pointed out that Automobiles consume less than 2% of the total consumption, Govt will not want to leave that since it is a benefit to common man.

The only way is to tax Diesel cars to the tune of 20% to offset the subsidy BUT also gaurantee that the subsidy for diesel would remain. I wonder why the govt did not raise tax in this budget. The diesel car buyer is "middle class and above" person. Taxing this would not affect the vote-bank anyway. I am not sure about this, thats why maybe i am not in politics, but working in a salaried job.

I would support subsidy to Mobile towers and shopping malls as increase in diesel prices would result in increase in mobile bills and increase in parking / food rates in malls. I am mentioning this as this is what an average middle class uses (I ignored the increase in transport cost which will have a cascading effect).

Last edited by scopriobharath : 24th May 2012 at 22:41.
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Old 24th May 2012, 22:47   #634
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by scopriobharath View Post
The only way is to tax Diesel cars to the tune of 20% to offset the subsidy BUT also gaurantee that the subsidy for diesel would remain. I wonder why the govt did not raise tax in this budget. The diesel car buyer is a middle class and above person. Taxing this would not affect the vote-bank anyway. I am not sure about this, thats why maybe i am not in politics, but working in a salaried job.
More than the opposition from the car manufacturers I think it was also our paid monkeys in the bureaucracy who couldn't figure out against which diesel cars the additional taxes should be made out against. Lets say if they have said all diesel passenger cars should pay an additional 20% excise duty, imagine the hit the Tatas and M&Ms would have taken. I sincerely doubt how many petrol cars the Tatas actually sell but in between M&M and Tatas along with the now come to party Maruti with its Swift & Dzire D, they corner probably 95% of all the diesel passenger cars sold. M&M would have seen the largest impact and the Tatas also would have suffered a lot. Would they have let it happen? I think not.

Though I agree that it was the most logical thing to do if the government honestly felt that diesel passenger cars are causing havoc to the "subsidy" bill. Actually even that is not true as they for now only account for less than 1%. The government with its frequent raiding on the petrol budget will ensure that value of 1% rapidly increases here on .
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Old 24th May 2012, 22:55   #635
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by samarjitdhar View Post
Lets say if they have said all diesel passenger cars should pay an additional 20% excise duty, imagine the hit the Tatas and M&Ms would have taken.

Though I agree that it was the most logical thing to do if the government honestly felt that diesel passenger cars are causing havoc to the "subsidy" bill. Actually even that is not true as they for now only account for less than 1%. The government with its frequent raiding on the petrol budget will ensure that value of 1% rapidly increases here on .



Taxing cars will offset the subsidy but the amount earned through this tax is peanuts compared to the big huge subsidy bill. Government will look at this 1% with a magnifying glass as this is a benefit / luxury the middle class white moneyed taxpayer is enjoying

It can also promote solar panels (offer tax benefits) and other technologies to reduce diesel consumption. India is a tropical country and most parts of india get sufficient sunlight for 8 months an year.
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Old 24th May 2012, 23:55   #636
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Quote:
Originally Posted by scopriobharath View Post
I would support subsidy to Mobile towers and shopping malls as increase in diesel prices would result in increase in mobile bills and increase in parking / food rates in malls. I am mentioning this as this is what an average middle class uses (I ignored the increase in transport cost which will have a cascading effect).
Same excuse is given by people who were justifying 2G scam that high license price will push mobile tariff upwards.
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Old 25th May 2012, 11:10   #637
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by vina View Post
While diesel (and to a far larger extent kerosene and LPG) has surely contributed to the subsidy bill, it beats me why would petrol not be a culprit for balance of payment problems. Can you elaborate on that part?
Hello Vina,

Under-recovery in Diesel, LPG & Kerosene is as follows:

Diesel - Rs. 13.64 per ltr
Kerosene - Rs. 31.41 per ltr
LPG - Rs. 479 per cylinder.

Thus from the above it is clear that for each liter of Diesel sold, Goverment has to pay Rs. 13.64 to Oil marketing Companies. SImilarly for every liter of Kerosene Government pays Rs. 31.41 & for every LPG Cyllinder the amount is Rs. 479.

In case of Petrol, as it is de-regulated commodity, Government does not pay any thing to Oil Marketing Companies, even if they make loss on sell of Petrol.

Also refer to the below article for detailed explanation: Morgan Stanley warns India of balance of payment risk - Indian Express

Thanks,
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Old 25th May 2012, 11:15   #638
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Happened to watch the interview of Kirit Parikh on CNBC TV18 by Udayan Mukherjee today morning. His take on the current diesel pricing.

Diesel price is lower than that of Furnace oil, a big anomaly

A minimum of Rs 4-5/- increase in diesel prices must be made now.
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Old 25th May 2012, 11:22   #639
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by Jignesh View Post
Diesel - Rs. 13.64 per ltr
Kerosene - Rs. 31.41 per ltr
LPG - Rs. 479 per cylinder.
Are they actual under recoveries (esp diesel), or just claims of the OMCs based on the international prices. I will like to know what is the actual cost of Dlesel - crude + refining + transportation. I am sure this will be significantly less that the current selling price. So the Govt is just takng its cut and then giving some of it back, under the table I may add.
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Old 25th May 2012, 12:13   #640
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by sgiitk View Post
Are they actual under recoveries (esp diesel), or just claims of the OMCs based on the international prices. I will like to know what is the actual cost of Dlesel - crude + refining + transportation. I am sure this will be significantly less that the current selling price. So the Govt is just takng its cut and then giving some of it back, under the table I may add.
+1 to that.

And that "cut" figure is blatantly adverstised as under-recoveries/subsidies and we lap it up so easily, especially with respect to diesel.


@Jignesh,
Two quite wrong assumptions
Quote:
Originally Posted by Jignesh View Post
Hello Vina,

Under-recovery in Diesel, LPG & Kerosene is as follows:

Diesel - Rs. 13.64 per ltr
Kerosene - Rs. 31.41 per ltr
LPG - Rs. 479 per cylinder.

Thus from the above it is clear that for each liter of Diesel sold, Goverment has to pay Rs. 13.64 to Oil marketing Companies. SImilarly for every liter of Kerosene Government pays Rs. 31.41 & for every LPG Cyllinder the amount is Rs. 479.
Under-recovery does not mean subsidy or actual loss. It simply means the oil company could choose to generate the additional revenue amount per liter/cylinder - the breakup of this includes
  • Actual (cost) loss factor
  • Potential revenue loss
  • Additional tax factor
The actual percentage breakup on the above three aspects is never revealed, so there is no use quoting or relying on new reports. They just parrot these numbers to get more views/discussions.

Quote:
Originally Posted by Jignesh View Post
In case of Petrol, as it is de-regulated commodity, Government does not pay any thing to Oil Marketing Companies, even if they make loss on sell of Petrol.
Again another wrong assumption - on paper, petrol is de-regulated, however the government still has a major say in when and what increase in the prices would apply. However none of the news channels or reports would dare to mention or link any kind of subside/under-recovery figures to petrol, considering the already inflated price due to the crazy tax structure.

Do note - I am stating that actual petrol price (without taxes) might be still lesser tha what is being charged to us, however the additional taxation over the base price completely makes that ir-relevant, as the difference amount will be miniscule when compared to the tax percentage figure.

But @Jignesh, leaving aside the above discussion, which might see no conclusion, I would like to know why the high exasperation & focus on diesel from your end? It's not like diesel car owners are living off petrol car owners - its just that the government has got a perfect cash cow in form of petrolheads while dieselheads can't be touched due to very obvious reasons. That's one of the reasons why I opted for a diesel car, over far cheaper petrol options.

But I pretty much see this picture changing in a few years, once the government gets it's act ready to milk the diesel car owners, without touching the other segments. But till then I feel our focus should be on reducing the tax structure for petrol, atleast on similar lines to what has happened in Goa. But I don't see a lot of people discussing that on TBHP or outside!

Last edited by ninjatalli : 25th May 2012 at 12:21.
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Old 25th May 2012, 12:28   #641
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by ninjatalli View Post
But @Jignesh, leaving aside the above discussion, which might see no conclusion, I would like to know why the high exasperation & focus on diesel from your end?
Perhaps because thats the topic/ title of this thread?

Quote:
Originally Posted by ninjatalli View Post
It's not like diesel car owners are living off petrol car owners - its just that the government has got a perfect cash cow in form of petrolheads while dieselheads can't be touched due to very obvious reasons. That's one of the reasons why I opted for a diesel car, over far cheaper petrol options.
ninja; as a diesel car owner you have a difficult task cut out for you if you try to convince any petrol car owner that their petrol hikes dont pay for diesel subsidy. Whatever the facts may be, the observation remains that the price difference that was 32/ 45 a couple of years ago now stands at 47/ 79 (or whatever the numbers are). It is only fair that subsidy burdens are shared among the economy. Regardless of which car you or I bought.

of course diesel owners will hit back saying this will hit other prices. in that case, a better idea would be to have an annual lumpsum tax for diesel owners - would you be happy with that?! I dont think so! There are many ways listed here on this thread itself, but who will bell the cat?

Or someone will say they pay a lakh more than for a similarly specced petrol car. But as we all know that extra lakh does not go towards bridging the subsidy; its for the difference in input build costs and goes to the manufacturer.
Here is an interesting read
http://www.firstpost.com/economy/pet...rs-319524.html
where it states among other things: "More importantly, the latest petrol price hike will only increase the government’s subsidy bill by increasing demand for diesel further. That’s the point to note here. Raising petrol prices does NOTHING (sic; Mods please note!) to cut down the government’s hefty subsidy bill. The losses on selling petrol are borne entirely by state oil marketing companies. Only the losses on diesel, kerosene and liquefied petroleum gas (LPG, or cooking gas) are partly compensated by the government and included in the subsidy bill."

Another article that raises the risk of India becoming a diesel deficit nation by 2016.
http://www.firstpost.com/economy/fas...on-267416.html

Eventually with so many folks moving to diesel usage, there is bound to be a supply issue. Till then its party time.
Edit: I am beginning to think I am performing yeomen service towards nation building by driving a petrol car. Twice over! Just kidding, dont start jumping all over me for that now

Fact is diesel is not touched due to political compulsions. Even petrol prices are manipulated/ delayed for various factors such as regional elections last year.

Last edited by selfdrive : 25th May 2012 at 12:39.
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Old 25th May 2012, 12:45   #642
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by sgiitk View Post
So the Govt is just takng its cut and then giving some of it back, under the table I may add.
Hello Mr. SGIITK,

There is nothing under the table. Govenment & Oil Marketing companies are doing this daylight robbery legally & we cannot do anything about this.

Quote:
Originally Posted by ninjatalli View Post
But @Jignesh, leaving aside the above discussion, which might see no conclusion, I would like to know why the high exasperation & focus on diesel from your end? It's not like diesel car owners are living off petrol car owners -
Hello Ninjatalli & Everyone Else,

Let me first clarifiy myself - I have no ill-feeling against Diesel Passenger Cars. I also do not think that Diesel Car Owners are living off Petrol Cars Owners.
Infact I accept that Diesel Car Owners have already paid alteast Rs. 1,25,000 more than Petrol Car of any model. Just for a example, there is Rs. 1,40,000 difference on prices of Swift Vxi & Swift Vdi in Mumbai.
Now with moderate usage (say 10,000 - 12,000 kms per year), the Diesel Car Owner will cover this extra Rs. 1,25,000 after minimum three years.
So, Diesel Car Owners I have nothing against you. You have already paid high price of Car for enjoying low priced fuel in future.

Now, coming to the point, what I am against is the manner in which Diesel Pricing handled & Car buyers are making a wrong choice.

I have mentioned this earlier, but still - why should Mall, Vovo Buses & Mobile towers generators get subsidized Diesel? Why should luxury Car owners get benefit of cheap Diesel? Why should a company generating 30% net profit every year, get benefit of Subsidized Diesel? There are numerous example like this where subsidized Diesel is misused in India. It is this misuse of subsidized Diesel that I am against.

Coming to passenger Car Buyers, the situation we are into now is people with very less usage (say less 8,000 kms per year) are also buying Diesel Cars, not realising that they will recover the additional amount paid for Diesel after 5 Years. Now imagine, after three years, government decides to match Diesel Price for passenger cars to Petrol price - Won't these Diesel Car buyers will not feel cheated?

Our would be the only Country, where choice of Petrol or Diesel Car is made with regards to Fuel Costs, rather than actual usage & performance of the Car.

Thanks,

Last edited by Jignesh : 25th May 2012 at 13:15.
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Old 25th May 2012, 12:56   #643
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

If the government of India decides to rise the price of Diesel, then the inflation, which is already at doulbe digit, will further increase. This is because the transport industry will have to bear with the higher fuel costs as well as the farmer who uses diesel genset and tractor will! The purchasing power of the INR is already too low. Added to this if the cost of food and other essential commodities increases, the whole economy will collapse!
Also RBI cannot increase the ROI further because the manufacturing output is already very low.
The only way ahead out of this mess IMHO is to look at reducing the taxes on fuel! and also look at other items and commodities which can be taxed at a higher rate to make up for the loss in the revenue!

Last edited by MCR : 25th May 2012 at 12:57.
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Old 25th May 2012, 12:58   #644
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by selfdrive View Post
ninja; as a diesel car owner you have a difficult task cut out for you if you try to convince any petrol car owner that their petrol hikes dont pay for diesel subsidy. Whatever the facts may be, the observation remains that the price difference that was 32/ 45 a couple of years ago now stands at 47/ 79 (or whatever the numbers are). It is only fair that subsidy burdens are shared among the economy. Regardless of which car you or I bought.
Bala,
Close to a decade back (which is the earliest I can remember petrol & diesel prices), the difference was hardly anything. A year down the lane, and diesel might be 50% of the price of petrol. That difference will be there and will keep on increasing.

And that's the point I'm trying to drive in. The big issue is not whether we are purchasing crude oil at the correct rate. The big issue is not if the oil companies are charging as per the cost factor. The big issue is the taxation amount.

Just consider the current price increase - oil companies wanted a hike of 6.3 Rs to offset their "losses". Ok, let's park that aside for now. But why the need for the additional 1.2-2.5 Rs tax amount over the 6.3Rs figure? None of the governments were losing any money right? Even if one can get to the break-up of the 6.3 figure, there probably would be VAT & excise duty (assumption), which again doesn't go to the oil companies. And that is where we need to focus. Tax. And that's what I keep trying to get every petrolhead to understand.

I get it from Jignesh's next post that he is aware of this. But so many petrolheads on this forum aren't. Or they simply choose to ignore it for the time being and parrot "facts" about subsidy & under-recoveries. And so similarly does the rest of the world.

On a joking note, I keep getting this perspective : There are two houses in a lane. The first house is on fire, but can be saved if both the house owners try to put out the fire. But rather than doing that, the owner is more intent on getting the other house on fire too!

Last edited by ninjatalli : 25th May 2012 at 13:01.
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Old 25th May 2012, 13:10   #645
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by Jignesh View Post
Infact I accept that Diesel Car Owners have already paid alteast Rs. 1,25,000 more than Petrol Car of any model. Just for a example, there is Rs. 1,40,000 difference on prices of Swift Vxi & Swift Vdi in Mumbai.
Now with moderate usage (say 10,000 - 12,000 kms per year), the Diesel Car Owner will cover this extra Rs. 1,25,000 after minimum three years.
So, Diesel Car Owners I have nothing against you. You have apready paid high price of Car for enjoying low priced fuel in future.
Perhaps thats the rationale behind buying diesel cars. But the extra lakh and a bit does not go to the subsidy bill. Its for the difference in input costs. And like you said, if diesel price = petrol or even deregulated, or if there is annual tax levied on diesel cars, how many of those buying a diesel car will buy one? They will go back to buying a petrol car. 99% of us (all people, not bhpians!) buy a car for its economy rate, not strike rate. If that makes any sense!

Quote:
Originally Posted by ninjatalli View Post
Just consider the current price increase - oil companies wanted a hike of 6.3 Rs to offset their "losses". Ok, let's park that aside for now. But why the need for the additional 1.2-2.5 Rs tax amount over the 6.3Rs figure? None of the governments were losing any money right? Even if one can get to the break-up of the 6.3 figure, there probably would be VAT & excise duty (assumption), which again doesn't go to the oil companies. And that is where we need to focus. Tax. And that's what I keep trying to get every petrolhead to understand.
I have always agreed with the tax part. In fact I have stated earlier - perhaps on this very thread - that taxes on fuel should be a fixed price and not a % of per litre price.

That said, I also state that for the economy to improve, diesel prices (and LPG) need to be rationalised as it is a direct hit to the subsidy bill.
Impact of the petrol price hike is only on the OMC balance sheets and nowhere on the subsidy bill.

Also, it would be better to see small hikes than one big hike. Look at petrol; this hike has been due since January. A 3 rupee hike then and a 2 rupee hike now would not create so much ruckus, but a 10% hike at one shot is too much. Well, it will just keep the news channels busy for a couple of days more and roads would be relatively empty. Nothing constructve will come out of it. Did anything happen last time?

ninja; You know the worst part about this? Now some governments will offer a 1 rupee rollback on tax and claim that in their next poll campaign strategy. They still get added tax and claim it as a people friendly move. How gullible are we?!

Last edited by selfdrive : 25th May 2012 at 13:14.
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