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Old 16th October 2012, 09:55   #961
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Originally Posted by apachelongbow

Wrong interpretation regarding food inflation sir! Current season, just post monsoon, food prices are at their weakest, hence a lower food inflation doesnt reflect that raising diesel prices has no effect, infact the drop in food inflation would have been greater :(
Actually that's wrong. Inflation is measured point to point, so the drop in food inflation shows that prices rose less between September 2012 and September 2011, than they did between April 2012 and April 2011. Given that the monsoon this year was worse than that last year, that is a positive. I agree fully that it would have fallen further if diesel prices had not gone up. But the important point is that despite the 10% hike in diesel prices, food inflation fell - which disproves claims made on this forum that there will be massive price rises due to the diesel price increase.

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Originally Posted by apachelongbow

interesting argument, if only in theory. However a wholesale rise in diesel prices have helped ensure a price rise in everything, atleast in Mumbai. Bus fares have risen, or are planned to rise, cab/rickshaw prices have risen (stating rise in cost of living), even though they are CNG operated.
There have been price increases but not materially more than the ordinary course price increases. And ordinary course price increases are fuelled by money supply, which increases when we run a deficit.

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Originally Posted by apachelongbow

Now as per honorable Dr Singh, the whole fuel pinch is because the rich drive fuel guzzling diesel SUV's, hence he has allowed a price hike, to combat more such SUV's Now can the govt please stand up and explain how come a Rs 5 hike has made our SUV drivers drive any less
Agree fully that SUVs are a red herring. The real waste is the use of subsidised diesel by trucks, farmers, DG sets etc. Which is why taxing SUVs or diesel cars will not dent the diesel subsidy and is not a feasible solution.

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Originally Posted by apachelongbow

If we are speaking of inefficencies, then its high time to disband the Public Sector oil companies, who are paying their unionized tanker drivers Rs 45000 per month.... Its easiest for a corrupt govt to milk the middle class more, and not take any serious steps in curbing inefficencies all around.
Agree fully that inefficient government spending must stop. But the fuel subsidy is the most egregious example of inefficient government spending. Face the facts, politicians spend your money, not money that is conjured from thin air. If you don't pay more for diesel directly, you will pay for it through higher inflation and lower growth, or even worse, through an economic crisis.
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Old 16th October 2012, 10:01   #962
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Mod Note : Please use the EDIT or MULTI-QUOTE buttons instead of typing one post after another on the SAME THREAD! To know how to multi-quote, click here (How to MULTI-QUOTE (when replying to a thread) on Team-BHP).

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Originally Posted by sgiitk View Post
1. Presumably the savings are proof against inflation in your view.
No my point actually is that if the poor/lower middle class/working class have to suffer increased costs or struggle to make a living by a change in govt policies, that policy is wrong. When the govt shouts slogans stating their hand is with the aam aadmi, then atleast their actions should reflect that thought. As of now, its the congress hand which is repeatedly slapping the common man!!!

Ideal case for stopping private vehicle diesel consumption was to slap a one time diesel cess on existing cars and increase diesel cess on new buys. Simple. It would have done what it was intended for. However due to underhand lobbying by the car makers we have this rise in diesel prices. Observed how the car lobby cheered for increase in diesel prices????

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Originally Posted by Hayek View Post
Actually that's wrong. Inflation is measured point to point, so the drop in food inflation shows that prices rose less between September 2012 and September 2011, than they did between April 2012 and April 2011. Given that the monsoon this year was worse than that last year, that is a positive. I agree fully that it would have fallen further if diesel prices had not gone up. But the important point is that despite the 10% hike in diesel prices, food inflation fell - which disproves claims made on this forum that there will be massive price rises due to the diesel price increase.


There have been price increases but not materially more than the ordinary course price increases. And ordinary course price increases are fuelled by money supply, which increases when we run a deficit.
Sir, is there any equation regarding how much higher can prices be raised, before inflation becomes a real threat? I am sure if the govt is thinking rationally about fuel hikes, then they must have some kind of equations to figure out how high can they go?

What I note is that inflation is about 7-8% as of now. Most of the companies are giving out hikes to the tune of 8-10% (just about mantain a higher cost of living). This is ok for the salaried class. What about the working class, small traders, business men etc? If they too increase costs by 10% it makes sense, however looking at the taxi fare hikes here, it seems more of an opportunity to scale up living standards!!

Last edited by GTO : 16th October 2012 at 22:06. Reason: Please use the EDIT or MULTI-QUOTE buttons instead of typing one post after another!
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Old 16th October 2012, 10:04   #963
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by Hayek View Post
Overall inflation rose in September... to a "massive" 7.8% from 7.6%. Food inflation actually fell to a low of 7.9% from 10.9% in April.
Check out the WPI published by GOI - http://india.gov.in/outerwin.php?id=...stry.nic.in%2F
Is there any correlation between diesel price increase & price of goods? Doesn't seem so from the data.
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Old 16th October 2012, 10:11   #964
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by apachelongbow View Post
Ideal case for stopping private vehicle diesel consumption was to slap a one time diesel cess on existing cars and increase diesel cess on new buys. Simple. It would have done what it was intended for. However due to underhand lobbying by the car makers we have this rise in diesel prices. Observed how the car lobby cheered for increase in diesel prices????
Two wrongs do not make a right. This bias has occurred because we have allowed Diesel (and LPG / Kerosene) prices to be kept artificially low for too long. So now you want to correct one mistake by a second one. The bulk of the PSU Kerosene ends up adulterating our Diesel and Petrol!

As for CNG it is non-starter. There is barely adequate supply even in cities, the distribution network is lacking, and there is no boot left in the car. Also, one again the fools in power will not allow RIL any hike to cover additional costs of the KG basin. Why because the holy cows namely the fertiliser and gas based power plants will have to pay more.
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Old 16th October 2012, 10:32   #965
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by msdivy View Post
Check out the WPI published by GOI - http://india.gov.in/outerwin.php?id=...stry.nic.in%2F
Is there any correlation between diesel price increase & price of goods? Doesn't seem so from the data.
We must take all govt published data with a large pinch of salt!!! Last time around when real inflation was galloping at about 12-14% the WPI was showing 6%. Infact a hue and cry was raised about wrong data, but as usual everyone forgot about this issue and nothing much was done.

If we think about it, why should there be any increase in price at all, if fuel price---> transport costs are increased? As a business man, I can as well offset increased expenses against taxation and still mantain older prices, as long as my profit margins are intact. Well ofcourse, for this I must pay tax in the first place.

Is there any way to get rid of the subsidy burden, and yet not affect or minimize pain to the lower working sections of our society?
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Old 16th October 2012, 10:51   #966
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by apachelongbow View Post
We must take all govt published data with a large pinch of salt!!!
That data is collected & published by National Sample Survey organization. You may chose not believe it, but that data is considered gospel truth, since every economic decision in this country so far is made on that data.
Quote:
Last time around when real inflation was galloping at about 12-14% the WPI was showing 6%.
Inflation is calculated based on WPI of a basket of goods (with 676 items). It includes gold, silver, DTH, oven, etc. Whether that basket is relevant is a different question. Actually anybody can create a basket and track inflation based on their selection of items.
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Old 16th October 2012, 10:59   #967
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

I'm always amazed when I see drop in inflation being haled as some sort of victory. From seven-point something to seven-pont- err-something? Oh great. That's marvelous --- but only in the minds of politicians who want to brainwash us into thinking they are doing something worthwhile.

Allow me to translate the headlines. When you see

Inflation Down!

think

Prices Still Going Up!

That is the reality. Inflation of nearly ten percent, year on year? Yes, 7 is nearly ten, right? Never mind point-this or point-that.
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Old 16th October 2012, 11:36   #968
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by Thad E Ginathom View Post
I'm always amazed when I see drop in inflation being haled as some sort of victory. From seven-point something to seven-pont- err-something? Oh great. That's marvelous --- but only in the minds of politicians who want to brainwash us into thinking they are doing something worthwhile.

Allow me to translate the headlines. When you see

Inflation Down!

think

Prices Still Going Up!

That is the reality. Inflation of nearly ten percent, year on year? Yes, 7 is nearly ten, right? Never mind point-this or point-that.
You are absolutely correct sir. Most of those celebrating the minuscule rise in inflation numbers on paper fail to say that these are WPI numbers and not retail inflation. India conveniently holds on to this archaic mode of calculating inflation because it suits the policy makers to look like great performers on paper. Moreover conveniently it is ignored that the rise in diesel prices happened after the mid of September so the impact is not at all visible in the September numbers. Moreover the effects of the LPG cap would be seen in a longer period.

Unfortunately a lot of us here live in a more theoretical world of economics and formulas rather than monitoring what is happening on the streets. Since the month has elapsed I have at least found a 10-20% increase in prices of everything I purchased. In comparison I had seen this same 10-20% increase spanned over a few months in the prices of products before the fuel price rise. What else can I attribute it to if the same rise happens in a span of one month after the fuel price rise? In fact I think the CPI was reported to be close to 10% (I cannot find the link because ET uses a horrible search tool) and this again doesn't take into account the effects of the fuel price rise in September. Once the numbers of October are in we can get a better picture. Also our government is known to under report bad numbers time and again. We have seen so many instances where IIP from previous months was revised downwards, in fact the July WPI was revised upwards by quietly. Please check here http://blogs.economictimes.indiatime...r-mango-people. So all those feeling vindicated about the minuscule rise in inflation, please take a pause and wait for the actual and hopefully correct numbers to spill out .

Having said all this I am not against removing subsidies from areas which don't need them but both petrol and diesel are taxed the hell out. So if the government cries over subsidies on these products I don't really care about their crocodile tears. The bane of India is a stupendous amount of corruption and eye popping wastage which needs to be plugged on a war footing. From recent news it is clear how much the nation loses its wealth to corruption as a result of which taxes have to be kept high, imposed on whatever the middle class purchases for their daily survival and unnecessary subsidies added to show that the government really cares. Unless we eliminate wastage and corruption there is no point having intellectual discussions about subsidies, taxes, inflation numbers, what not.
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Old 16th October 2012, 16:19   #969
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by sgiitk View Post
.... Also, one again the fools in power will not allow RIL any hike to cover additional costs of the KG basin. Why because the holy cows namely the fertiliser and gas based power plants will have to pay more.

Sir

while I agree with you on most other stuff, I'm not sure what is the cause of this whining over RIL - they gold-plated their projects and are now crying foul for their own follies.

Why should one holy cow (RIL) be favored more than the other ones?
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Old 16th October 2012, 20:12   #970
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

WPI was last modified in Sept 2010 taking base year as 2004-2005.
A look at the basket of items and weight assigned can tell why consumers always feel real inflation is high compared to what WPI data states.

Examples: Fuel and power has 14% weight , Manufactured products 64% and primary articles 20%

Manufactured products consists of mostly items which are intermedatories like transformers , Construction machinery , palm oil etc which may or may not reflect the impact on end consumer directly.

CPI is more direct measure of impact on consumers provided the basket of consumption in diverese country is captured accurately.

Secondly food inflation is seasonal and impact of fuel hike on food inflation is captured once a full cycle is complete.
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Old 16th October 2012, 21:06   #971
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by vina View Post
Sir

while I agree with you on most other stuff, I'm not sure what is the cause of this whining over RIL - they gold-plated their projects and are now crying foul for their own follies.

Why should one holy cow (RIL) be favored more than the other ones?
Agreed. While it is OT, they have historically been known to massage perceptions by creatively interpreting facts to achieve their ends. I have just one question - if everything was hunky-dory at their end , they would not have cited commercial confidentiality considerations as justification for refusing audit by the CAG.

Any way, naysayers notwithstanding, the catastrophe that was supposed to unfold due to rationalising diesel pricing is still awaited. With bated breath I must add.

Last edited by RS_DEL : 16th October 2012 at 21:08.
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Old 17th October 2012, 09:49   #972
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

I agree with vina. Let me just add that I think they did not anticipate the problems in KG6 and this is the reason then roped in BP as well. My own view of Reliance will probably open me to libel aaction if stated.

I think we have digressed enough on economics, and let us get down to the issue that Diesel is costing the PSU Oilcos about 10 per litre more than the price, K-oil and LPG even more. Is there any solution apart from raising Diesel prices, since the other two are (un)holy cows. Now we seem to agree that slaying the Diesel animal, is not such a big deal after all. Heavens have not fallen.

As a pucca petrolhead if there is some saving I will also rejoice.

Last edited by sgiitk : 17th October 2012 at 09:52.
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Old 27th December 2012, 14:37   #973
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Here's another one - diesel could go up by Rs 10 in 2013

http://profit.ndtv.com/news/economy/...e-otherstories
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Old 27th December 2012, 15:13   #974
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

It will be easy. Allow 3 more LPG cylinders and hike Diesel by Rs.15/. A bit of low level hullabaloo, and that is all. May be 0.2% on inflation.
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Old 27th December 2012, 15:46   #975
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Is there any window in 2013 where there are no state elections in the near future? If not, they might not actually do this, but would still declare all this as an eyewash to ensure India's credit rating doesn't take a hit among international analysts.

When they hiked the diesel prices by Rs.5, it was told that another 5 would be increased in a phased manner over the course of the fiscal year. We just have 3 more months left and I don't see it happening before March.

On a lighter note, increase in diesel prices might probably help me go one segment higher for my next upgrade
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