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Old 13th June 2012, 10:58   #766
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Default Re: Proposal to increase the prices of Diesel cars put forward (almost 2.55L increase

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Originally Posted by shankar.balan View Post

Instead, why dont they let go of some of the tax pie and make it more palatable for the common man. Raise the price of Diesel by another 5-10 bucks - make it Rs 50-55 per litre. Correspondingly bring down Petrol also to 50-55. Cut the taxes and this will happen.
While this may make sense to a great many, alas this will not happen. Because of a factor called Realpolitick.:( Raising diesel prices is just not on for many smaller political parties (read the UPA allies) because it is not populistic. Putting an additional levy on diesel cars will not draw the wrath of the allied parties like TMC - hence the proposal might just squeak through.
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Old 13th June 2012, 11:01   #767
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Guys this is just a proposal! So no need as of now to go hung ho! This proposal is given just to show to one and all that the subsidy given on Diesel cannot be removed! Its also to show that there was a proposal given by the Oil ministry which was not accepted by the Finance Ministry. This way they can push the delicate topic of fuel subsidy removal for the future!
Also the industrial growth is now at 0.1% and this move, if it happens, will bring it to negative. Also looks like the Monsoons are a flop this year, at least for now.

So there is no need to consider this piece of news seriously!

I think India Inc. is officially now in Recession!

Last edited by MCR : 13th June 2012 at 11:04. Reason: Typo
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Old 13th June 2012, 11:01   #768
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Actually this is interesting, we are hearing this rumours of hike in Taxes on Diesel Cars since last two years but nothing has materialised yet.

We all know that there was a proposal like this in Bugdet this year & Car Manufacturers ensured to generate best sales figures in March 2012. Subsequently nothing happened in Budget.

Now, whether this happens or not, only time will tell, but frankly to me it seems this is another (black) money making idea by government. During past two years Automobile Manufacturers have lined up significant investment in building Diesel Car manufacturing facilities. Now after this announcement (read threat of hike in Diesel Car Taxes) there will be huge lobbying by Automobile Manufactueres (SIAM) & we all know that no lobbying can place without some give & take on both sides.

It is really hard to understand, why is Government shying from increasing Diesel Prices atleast by Rs. 2 - 4?

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Old 13th June 2012, 11:13   #769
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Soon, we will start seeing TV adverts about how inflation was controlled and common man is so happy. Food prices have come down and India is shining. Because elections are not that far.
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Old 13th June 2012, 11:17   #770
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by tj123 View Post
Govt may slap Rs 1.7 lakh tax on small diesel vehicles (ET)
12 Jun, 2012, 07.45PM IST, The writer has posted comments on this article Rajeev Jayaswal,ET Bureau

NEW DELHI: The government plans to slap additional levies of Rs 170,000 on small diesel cars and Rs 255,000 on medium and large diesel vehicles to check dieselization of economy due to wide gap between petrol and diesel prices.

"The oil ministry has asked the finance ministry to impose additional excise duty on diesel cars and the matter is under consideration," a government official said.

Oil ministry officials confirmed that its proposal was "favourably" considered. "The money thus raised could be used to meet part under-recoveries (revenue losses of state oil firms in selling fuels below market rates)," an oil ministry official said.

The government expects that the levy would help it in meeting about Rs 10,000 crore annual revenue losses of state oil firms in selling diesel below market rates.

Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum had lost about Rs 81,000 crore revenues in 2011-12 due to a freeze in diesel rates.

Diesel price is frozen in the country for almost a year due to political reasons and it is almost 74% cheaper than petrol, which is a major disincentive for buying petrol vehicles.

Diesel is sold at Rs 40.91 a litre in New Delhi, more than Rs 30 a litre cheaper than petrol.
Read this in todays TOI as well.

Quote:
Increase duty on diesel cars up to Rs 2.5 lakh: Jaipal Reddy (TOI)
If the government accepts oil minister S Jaipal Reddy's proposal, the price of small diesel cars could soon rise by Rs 1.7 lakh while medium-to-large guzzlers could become costlier by Rs 2.55 lakh a piece.
The proposal to impose additional excise duty on diesel cars is bound to trigger protests from automakers, who have seen sales growing at the slowest pace in seven months in May. Domestic car sales declined 24% in May compared to the year-ago period due to high fuel prices and interest rates.
The proposal drew a thumbs down from analysts and private players, who described it as an excuse to avoid fuel pricing reforms. "From the RBI to C Rangarajan, head of the PM's Economic Advisory Council, everyone has recommended deregulation of fuel prices. If you can't do that for political reasons, at least fix subsidy on diesel and then let the market determine the pump price. Taxing vehicles would serve hardly any purpose," said an industry analyst requesting anonymity.
But Reddy has his arguments for seeking taxing diesel vehicles that are outpacing petrol car sales. In a June 7 letter to finance minister Pranab Mukherjee, the oil minister gave three key reasons for his proposal aimed at arresting a ballooning fuel subsidy bill.
Reddy pointed out that the proposed additional excise duties are equivalent to the minimum benefit that a diesel car owner derives from the fuel's price differential with petrol at current prices over a 10-year assumed life of a vehicle. Petrol in Delhi costs Rs 71.16 a litre against Rs 40.91 for diesel.
Reddy's arithmetic goes like this: he first calculates the total distance a vehicle is expected to clock in its 10-year life span, assuming an annual run of 18,000km. Then, he works out the fuel costs by taking a median mileage of 18km to a litre for small cars and 12km for medium/large vehicles. For good measure, he shaves off 10% of the total cost to level.
According to Reddy's calculation, the additional excise duty amounts to asking the diesel car buyer to pay upfront the price differential with petrol that he or she would enjoy later. A petrol car owner, in contrast, shells out every time at the pump.
Reddy also pointed out the adverse impact of increased diesel car sales on the government's earnings. Petrol attracts an excise duty of Rs 14.78 per litre against Rs 2.06 a litre for diesel. So each time a buyer opts for a diesel car instead of petrol and visits a petrol pump, the government loses Rs 12.72 in excise duty on litre of diesel. Together with the Rs 12.53 a litre subsidy on diesel, the actual price differential with petrol at Delhi works out to Rs 25.75 a litre.
To drive home the enormity of the situation arising out of this increasing dieselization, Reddy says diesel consumption rose by 7.6% in 2011-12 against 6.2% in 2010-11. In contrast, growth in petrol consumption fell from 10.7% in 2010-11 to 5.6% in 2011-12.
The Kirit Parikh Committee on fuel pricing reforms had recommended an additional excise duty of Rs 80,000 in February 2010 when duty difference on petrol and diesel was Rs 9.75 a litre and under-recovery on petrol was more at Rs 3.97 a litre than Rs 2 on diesel.
Two absurd things about this.
1. Tax only new diesel vechicles? pass on all the burden to new diesel vehicles only when there will be n times more existing diesel vehicles who will continue to eat up the subsidy. what school of thought is that?
Instead they should go ahead and increase diesel prices by marginal 1-2 rupees. This will help in easing the burden subtantially and everyone will contribute not only new buyers
2. If you add such a large tax on new vehicles and then want to rollback(before every election) all the people who have purchased the diesel vehicle will get impacted hugely. In that case new car will become cheaper than a 2-3 year depreciated old car.
Instead roll back of diesel price hike is much easier and every one benefits from it.

Just did a quick calculation based on what Jaipal Reddy is proposing and my assumption on % of diesel cars sold in each category.
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Last edited by the VTEC guy : 13th June 2012 at 11:30.
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Old 13th June 2012, 11:36   #771
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Post re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by the VTEC guy View Post
Two absurd things about this.
1. Tax only new diesel vechicles? pass on all the burden to new diesel vehicles only when there will be n times more existing diesel vehicles who will continue to eat up the subsidy. what school of thought is that?
Instead they should go ahead and increase diesel prices by marginal 1-2 rupees. This will help in easing the burden subtantially and everyone will contribute not only new buyers
If this proposal is accepted the second hand diesel market will see a boom. But something has to be done to offset the petrol-diesel price imbalance. I am not sure if this is the right step but this step seems to be taken to shield the farmers from the diesel price rise which may lead to inflation of all commodities.

@the VTEC guy.. Your calculation seems to be based on the assumption that sales of diesel cars will not be affected if the proposal is accepted. I feel that sale of diesel cars will decline by more than 50pc in the hatchback segment at least.

Last edited by nair : 13th June 2012 at 11:40.
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Old 13th June 2012, 12:13   #772
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by MCR View Post
Guys this is just a proposal! So no need as of now to go hung ho! This proposal is given just to show to one and all that the subsidy given on Diesel cannot be removed! Its also to show that there was a proposal given by the Oil ministry which was not accepted by the Finance Ministry.
It is also a sneaky way of trying to show they are doing something without actually doing anything. Basically claiming credit for things that are not done. A bit similar to some of our appraisals at work.

Quote:
Originally Posted by ottocycle View Post
Soon, we will start seeing TV adverts about how inflation was controlled and common man is so happy. Food prices have come down and India is shining. Because elections are not that far.
Yes, on which crores will be spent. Where does that money come from?

Quote:
Originally Posted by the VTEC guy View Post
Just did a quick calculation based on what Jaipal Reddy is proposing and my assumption on % of diesel cars sold in each category.
Instead of applying ~2L on each new car, is it possible to get an estimate of all existing diesel cars (number/ count) and apply a 20K levy? Perhaps this would get them more money than only taxing new diesel cars.

Last edited by GTO : 14th June 2012 at 14:59. Reason: Quoted post deleted
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Old 13th June 2012, 12:43   #773
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

This certainly will have extension to cover existing diesel cars.

Phase 1. Put surcharge on new cars. 1.75 Lakh and Up. (This will cover new entrants)
Phase 2. Increase rate of Diesel for all applicable private diesel cars (Thiw will cover all existing private diesel car users.)
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Old 13th June 2012, 12:57   #774
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Slowing demand is just one measure but it will not help the 1,80,000 Rs of loss from the Diesel subsidy. This money is not lost now from future cars, but from the ones that are plying on the road. By slowing the demand you can restrict the 1,8 L Cr to say 2 L Cr rather than say 2.2 L Cr (just for the sake of argument, not stats), but that will not help curb the current deficit. So in the end what is the use? You will only skew the re-use market, nothing much. First of all subsidy is an artificial means of balancing supply and this additional stupid tax is an artificial means of curbing demand.

One way would be that for current diesel cars (for taxi segment) you can increase the tax when they need to renew each time (that way you make up for existing vehicles), but what about privately owned cars? Would you request them not to make an additional tax payment? All this is stupid. Fix the source (the diesel price) rather than treating the symptoms.
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Old 13th June 2012, 13:13   #775
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

+1 to what man_and_machine said. Fix the diesel prices and lower petrol prices and make pricing of the 2 similar to how it is in other countries.

Cars just constitute just about 5% of India's diesel consumption. The rest goes towards railways, power plants, generator sets, trucks, agriculture, etc. Why should only 5% of the diesel consumers pay a premium so high? Because an average car owner has no unions or associations to go to, to protest against the decision. We simply rant, pay up more and move on.

Will they dare to make truck owners also pay a similar extra duty now when they purchase the trucks? The truck unions will shut down supplies across the country in protest. They will protest even if the diesel price is hiked by 1 rupee, so the government lives in eternal fear and targets the weaklings instead (us 5% of the diesel consumers).

I am sure SIAM won't take this lying down if they suggest such anti-automobile-industry moves taxing 2L extra. It is 30% of the car price itself (for say, a beat or swift). Ridiculous suggestion!

Last edited by KarthikK : 13th June 2012 at 13:18.
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Old 13th June 2012, 13:22   #776
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Default Re: Proposal to increase the prices of Diesel cars put forward (almost 2.55L increase

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Originally Posted by arvind71181 View Post
Inistead of deregulating diesel prices or reducing the levied taxes, the government choses to do this?? I dont understand the logic of increasing the price by this much. How are the assumptions of a 10 year life span for an average car made? Do people really keep cars for 10 years? I was assuming that it would be in the range of 5-6 years.

PS: If as usual, this is just a rumour, then kindly ignore the post
Thats what, if they say that the increase to be around 1.7 to 2.5 lakhs, it'll be negotiated and auto bodies might get it down to say 1 -1.5 lakh..
this is the way our govt operates.. firstly increase the prices, then reduce by a small margin.. all in the name of common man..
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Old 13th June 2012, 13:26   #777
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Why this government keeps crying about the "subsidy" and not talk about the "tax"!!!, either they tax the new vehicles or make diesel costlier it will have a huge impact n diesel car sales..

As the fuel cost goes up more and more people will be forced to either reduce the usage or stop using the cars.
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Old 13th June 2012, 13:48   #778
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by KarthikK View Post
Will they dare to make truck owners also pay a similar extra duty now when they purchase the trucks? The truck unions will shut down supplies across the country in protest. They will protest even if the diesel price is hiked by 1 rupee, so the government lives in eternal fear and targets the weaklings instead (us 5% of the diesel consumers).
Well it is also true that private diesel car owners use the car for umm private use. Contrariwise trucks, railways, public transports provide public service to millions. We enjoy those benefits in terms of lower prices of commodities which would not have been possible had diesel been priced higher or if they ran on petrol. This is not considering that central and state governments happily tax away diesel while on the other hand it considers diesel an essential commodity and poor man's fuel and what not. Hypocrites of the first order . If both taxes and subsidies are removed, diesel will actually stay at its current price.

I now expect another wave of sensational reporting by the Times group because of this http://www.nytimes.com/2012/06/13/he...-who-says.html.

Quote:
Diesel fumes cause lung cancer, the World Health Organization declared Tuesday, and experts said they were more carcinogenic than secondhand cigarette smoke.

The W.H.O. decision, the first to elevate diesel to the “known carcinogen” level, may eventually affect some American workers who are heavily exposed to exhaust. It is particularly relevant to poor countries, where trucks, generators, and farm and factory machinery routinely belch clouds of sooty smoke and fill the air with sulfurous particulates.

The United States and other wealthy nations have less of a problem because they require modern diesel engines to burn much cleaner than they did even a decade ago. Most industries, like mining, already have limits on the amount of diesel fumes to which workers may be exposed.

The medical director of the American Cancer Society praised the ruling by the W.H.O.’s International Agency for Research on Cancer, saying his group “has for a long time had concerns about diesel.”

The cancer society is likely to come to the same conclusion the next time its scientific committee meets, said the director, Dr. Otis W. Brawley.

“I don’t think it’s bad to have a diesel car,” Dr. Brawley added. “I don’t think it’s good to breathe its exhaust. I’m not concerned about people who walk past a diesel vehicle, I’m a little concerned about people like toll collectors, and I’m very concerned about people like miners, who work where exhaust is concentrated.”
Also I expect to completely ignore this important paragraph for the sake of TRPs

Quote:
“I don’t think it’s bad to have a diesel car,” Dr. Brawley added. “I don’t think it’s good to breathe its exhaust. I’m not concerned about people who walk past a diesel vehicle, I’m a little concerned about people like toll collectors, and I’m very concerned about people like miners, who work where exhaust is concentrated.”

Last edited by samarjitdhar : 13th June 2012 at 13:52.
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Old 13th June 2012, 14:15   #779
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Quote:
Originally Posted by samarjitdhar


Another masterpiece from the our met department was when they contradicted the US and the Oz met departments who had predicted a 50% chance of an El Nino this year by announcing yesterday that there was only a 30% chance of an El Nino. Case in point, the US and Oz met departments diligently track the El Nino phenomenon because it affects their rainfall. Our met department doesn't track this phenomenon even though it is clear from the last 15 years it affects our monsoons and still they make such bold pronouncements (head banging again, only two smileys per post).
According to some of my pals Oz has had max rainfall this year after ten years!

On another note this level of proposed taxes are absolutely ridiculous indeed.

If they give me decent, safe public transport with last mile connectivity I will use that during the week and take my car out only on weekends!
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Old 13th June 2012, 14:20   #780
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

I need some help to figure this out.

1. Petrol in india is heavily taxed. petrol costs 40 or so(refinery) and then we have tax adding up to 35rs. effective price 79 rs

2. Diesel has not so much tax, and diesel costs 46 in bangalore. I somehow don't understand subsidy funda. Are we saying the total price spent for refinement of crude is more for diesel ? Can i safely assume Diesel costs 40-45 at source ?

3. Price of crude is falling day by day and its below 100$. Agreed Rupee has depreciated, but its stable(not getting worse) in last week or so.

4. Last quarter results of all the Oil PSUs and refineries showed they are all doing healthy.

So my calculation shows that there is no such thing as loss here and even if we are talking about losses its going to be in terms of few rupee per liter and not 10-20 rupee per liter.

So can somebody please enlighten me what loss are we talking about ?
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