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Old 22nd September 2012, 23:15   #931
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by StarScream View Post
what was it two years back and what is it now? I've only had piped cooking gas for 6 months and the price has risen twice already. With KG-D6 output floundering, we're importing gas as well.
Hmm - I have been using CNG in my car for 1.5 years & the price has risen once I think - and it was just a couple of rupees. It's still dirt cheap compared to petrol. I have had piped gas for 2.5 years now - but haven't noticed the price/unit - however my monthly bills haven't changed significantly enough for me to notice.
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Old 23rd September 2012, 22:47   #932
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by MHG View Post
I believe the way to go forward is completely deregulated prices for all commodities in India. If essential commodities prices are affected for the poor, PDS system should be made stronger and more effective to insulate them. That would result in better direction of resources at points that actually need help. Imagine how many can benefit if the money used to subsidize diesel is used for welfare related measures directly.
It's easier said than done. Deregulation in all sectors might turn the country into a Greece or some other European nation.
Diesel price hike is not only related to increased transportation cost, it also results in increased agricultural cost as diesel is needed to run irrigation pumps. Not all farmers are rich and they don't own cars with airbags and ABS. What happens to them? A dual pricing system again? This has never worked in India.
What happens to cost of medicines if we go for deregulation? Paracetamols selling at Rs 100/- a tablet? Forget the poor, even some people like us will have to forget about owning a car!
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Old 23rd September 2012, 22:54   #933
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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It's easier said than done. Deregulation in all sectors might turn the country into a Greece or some other European nation.
Diesel price hike is not only related to increased transportation cost, it also results in increased agricultural cost as diesel is needed to run irrigation pumps. Not all farmers are rich and they don't own cars with airbags and ABS. What happens to them? A dual pricing system again? This has never worked in India.
What happens to cost of medicines if we go for deregulation? Paracetamols selling at Rs 100/- a tablet? Forget the poor, even some people like us will have to forget about owning a car!
I never meant total deregulation. I just meant non essential commodities should be totally deregulated, while diesel which is also an essential commodity should be provided at subsidized rates only for farmers and the like. The money that is being spent subsidizing diesel for everyone in the country can instead be spent subsidizing only those people who are in need of subsidy. Dual pricing is prone to exploitation but hey, it still brings about some degree of control unlike the current scenario.
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Old 24th September 2012, 08:44   #934
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Dual pricing will trigger black market, what if government depromote diesel car and suvs
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Old 24th September 2012, 16:04   #935
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

What the govt should do is increase diesel prices by so much amount as to make diesel cars/suvs economically viable only if they run 50000kms per year or more. This move is feasible if diesel is increased by 5Rs more, as is the difference in cost between diesel and petrol vehicle is about Rs100,000 or more. When this difference in ownership and running cost can be recovered only by high milage usage per year, this will benifit the agriculture and transport sectors. The average joe who is buying diesel car to save a few bucks now has no incentive to buy a diesel car.
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Old 24th September 2012, 16:12   #936
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Why not remove all kind of taxes from Diesel and then increase the price? AFAIK the tax on a liter of diesel is about 9 rupee, at current Bangalore price of 51.15, reduce it by 9 and to resolve so called loss making of oil PSUs, increase the price by 5 Rupee. I hope no one will complain, but still I fail to understand how the PSUs are making loss and the same is not reflected in their Balance sheet???
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Old 24th September 2012, 17:36   #937
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by asdon View Post
Why not remove all kind of taxes from Diesel and then increase the price? AFAIK the tax on a liter of diesel is about 9 rupee, at current Bangalore price of 51.15, reduce it by 9 and to resolve so called loss making of oil PSUs, increase the price by 5 Rupee. I hope no one will complain, but still I fail to understand how the PSUs are making loss and the same is not reflected in their Balance sheet???
I am not too sure how to put this across. The loss that the OMCs are harping about is the notional loss.
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Old 24th September 2012, 18:50   #938
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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I am not too sure how to put this across. The loss that the OMCs are harping about is the notional loss.
Then its one kind of loss which is buzzing these days, "If I sell Diesel at 65 Rupee I will make 17 Rupee profit, now I am selling at 50, so I am loosing 15 Rupee"
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Old 24th September 2012, 19:11   #939
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Then its one kind of loss which is buzzing these days, "If I sell Diesel at 65 Rupee I will make 17 Rupee profit, now I am selling at 50, so I am loosing 15 Rupee"
This is absolute mischaracterisation. The oil companies are selling at a loss. However, the govt compensates them for this loss by issuing oil bonds, which oil companies sell to cover the loss. However, issuing oil bonds is just like printing money/deficit financing. It causes inflation.
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Old 24th September 2012, 19:19   #940
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by carboy View Post
This is absolute mischaracterisation. The oil companies are selling at a loss. However, the govt compensates them for this loss by issuing oil bonds, which oil companies sell to cover the loss. However, issuing oil bonds is just like printing money/deficit financing. It causes inflation.
Point taken, so by Oil bonds the loss is covered, then how they are posting profit?

http://www.moneycontrol.com/financia...rofit-loss/IOC

Kindly explain...

Last edited by asdon : 24th September 2012 at 19:22.
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Old 24th September 2012, 19:34   #941
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by asdon View Post
Point taken, so by Oil bonds the loss is covered, then how they are posting profit?

http://www.moneycontrol.com/financia...rofit-loss/IOC

Kindly explain...
I assume oil bonds cover losses plus also factor in any profit. Other than oil companies do sell lot of other stuff other than petrol and diesel. They sell all kinds of lubricants etc. Plus petrol sells at a profit a lot of times. Premium petrol always sells at a profit.
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Old 24th September 2012, 21:34   #942
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by asdon View Post
Point taken, so by Oil bonds the loss is covered, then how they are posting profit?

http://www.moneycontrol.com/financia...rofit-loss/IOC

Kindly explain...
This is quoted from another thread. Hope it answers your question.
See the revenue from operations is made up of almost 47000 crores grant from the govt. of India on addition to the sales turnover. Thats how they make profit.

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Sir, All information is available on Public /websites. In this case refer to following link http://www.iocl.com/AboutUs/AnnualRe...tment_2012.pdf.

Refer to page No. 169, Note No 20 Revenue from operations. IOCL has recieved Rs. 47000.00 Crores from Govt in form of Grants & Subsidies in Fiscal Year 2011-12.
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Old 25th September 2012, 14:06   #943
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

The way whole cycle works:

1. Govt doesn't have enough money to spend (on what is OT!).
2. To finance spending, Govt taxes Oil (in all forms petrol, diesel, ..)
3. Society cannot sustain the price + tax. So Govt forces OMCs to sell at a value less than (OMC cost + taxes).
4. OMCs, as autonomous (?!) bodies sell at loss, cry hoarse (of losses, potential future impacts, etc).
5. Govt prints Oil bonds, issues to OMCs. OMCs sell Oil bonds and make their balance sheets happy.
6. Govt interest burden goes up with increasing bonds. Along with populist schemes it worsens and it finds it worse to manage.. so.. increase taxes!

Now, what is the root cause? Govt. spending more than what they earn.

That said, there is indeed a need to tax the fuel that is used by farmers, transport lesser than luxury (read: cars, malls, etc). It can be classifying as fuels for these essential sectors and otherwise. One way could be classifying the fuel itself and other could be using dual pricing etc or additional taxes.. But that needs a long term policy which our short sighted politicians don't want to have.

Whichever ways, there seems to be no way out except fiscal discipline and policy changes. Either Govt does it on its own or the economy forces them to.

PS:
1. I would our honorable PM's remark that diesel price is hiked due to car. SUV usage rather funny.
2. I don't have a diesel car!

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Originally Posted by carboy View Post
Do you have a suggestion on how to implement dual pricing?
From prev posts I understand it is successful in UK. Whether it is possible to replicate in India is a different topic altogether.

Last edited by babu.sundaram : 25th September 2012 at 14:15.
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Old 25th September 2012, 14:11   #944
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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
That said, there is indeed a need to tax the fuel that is used by farmers, transport lesser than luxury (read: cars, malls, etc). It can be classifying as fuels for these essential sectors and otherwise. One way could be classifying the fuel itself and other could be using dual pricing etc or additional taxes.. But that needs a long term policy which our short sighted politicians don't want to have.
Do you have a suggestion on how to implement dual pricing?
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Old 25th September 2012, 16:44   #945
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by carboy View Post
Do you have a suggestion on how to implement dual pricing?
Farmers, who are actually involved in agriculture, can be issued ID cards or say their ADHAR card should reflect them as farmer and they can produce the same at a retail fuel outlet and take Diesel at subsidised rate, others can enjoy the hight price.

But this will not help, as many farmers are so rich they also drive those fuel guzzling SUVs, they will get their IDs and fill the tanks. its mango people(aam aadmi) like me and others who ride on National Diesel Engine will pay the price.
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