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Old 5th January 2013, 10:47   #991
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Hello All,

Government is finally taking into consideration the Kelkar's committee's recommendation on reducing subsidy burden, especially the subsidy on Diesel.

By now we have all heard of proposed Diesel price hike of Rs. 1 per month for 10 months, there is another opinion of fixing subsidy on Diesel at Rs. 5 per liter, etc.

We also know the political impact of hike in Diesel prices. What remains to be seen is when does the government shows the political will & teeth to undertake harsh reforms, which someday, someday will have to decide upon. These subsidies (be it Diesel or other items) cannot last for lifetime.

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Old 5th January 2013, 11:15   #992
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

In most of the countries Diesel costs more than petrol. It costs more to produce a litre of diesel than litre of Petrol.

In India, Diesel being prime fuel for transportation of goods, on road as well as on rails, our government can not afford to sell diesel at international rates. It will have cascading effect on all commodities that need transport.

On the other hand, government is very highly dependent on taxes collected from petroleum products, tobacco products and alcohol. It is therefore happy to collect high taxes from these products on one hand and keep saying that we are making up losses of petroleum companies by providing subsidy, on the other.

Why not reduce the taxes and give more money to petroleum companies by keeping the prices same? Government always avoids answering this question!

Both state and central government earn a lot from taxes on petroleum products. e.g. If one looks at the price of petrol in Goa, one will understand how much we pay to state government by means of taxes.

Moral of the story - Government will not increase the price of diesel substantially. May be it will start collecting additional tax from cars using diesel as fuel. May be diesel cars soon have to pay tax every year rather than one time tax.

My suggestion - Start selling low sulfur diesel at international price in addition to normal and Make it mandatory for cars to use low sulfur diesel only and car manufacturers to build car engines that use low sulfur diesel only.

This way car owners will benefit with better quality (Next Generation) engines. Government will not loose on sale of diesel and Pollution will be lower.
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Old 5th January 2013, 14:17   #993
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

While at suggesting how to rationalize/subsidize or to remove subsidy on diesel, the govt should actively encourage setting up CNG dispensing stations across the country.

A substantial number of people, who would otherwise have gone for petrol cars but for the considerable difference of prices of petrol and diesel, would consider buying the CNG powered cars.

Running trucks on CNG may not be possible in near future but RTCs can fully shift to CNG ( some city buses do run on CNG).

The key is to facilitate setting up of adequate number of dispensing stations, not only in cities and towns but on highways too.

Setting up dispensing stations on highways is very important to persuade car buyers to look at CNG options.

There would be many obstacles to create a good network of CNG stations but it is not impossible. It is better to suffer once than to worry constantly about the international diesel prices and the subsidy burdens.

Last edited by simplyself : 5th January 2013 at 14:38.
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Old 5th January 2013, 15:45   #994
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by CANPUSH View Post
In most of the countries Diesel costs more than petrol. It costs more to produce a litre of diesel than litre of Petrol.

In India, Diesel being prime fuel for transportation of goods, on road as well as on rails, our government can not afford to sell diesel at international rates. It will have cascading effect on all commodities that need transport.
What about the other countries where Diesel costs more than Petrol? What is their prime fuel for transportation of goods?
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Old 5th January 2013, 20:04   #995
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by carboy View Post
What about the other countries where Diesel costs more than Petrol? What is their prime fuel for transportation of goods?
The fuel used for transportation of goods is diesel.This applies to USA and every European and Asian country.Every cargo ships use diesel.

Even the US military uses diesel powered humvee,LAV,IFV and trucks.
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Old 5th January 2013, 23:21   #996
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by CANPUSH View Post
In most of the countries Diesel costs more than petrol. It costs more to produce a litre of diesel than litre of Petrol.

In India, Diesel being prime fuel for transportation of goods, on road as well as on rails, our government can not afford to sell diesel at international rates. It will have cascading effect on all commodities that need transport.

On the other hand, government is very highly dependent on taxes collected from petroleum products, tobacco products and alcohol. It is therefore happy to collect high taxes from these products on one hand and keep saying that we are making up losses of petroleum companies by providing subsidy, on the other.

Why not reduce the taxes and give more money to petroleum companies by keeping the prices same? Government always avoids answering this question!

Both state and central government earn a lot from taxes on petroleum products. e.g. If one looks at the price of petrol in Goa, one will understand how much we pay to state government by means of taxes.

Moral of the story - Government will not increase the price of diesel substantially. May be it will start collecting additional tax from cars using diesel as fuel. May be diesel cars soon have to pay tax every year rather than one time tax.

My suggestion - Start selling low sulfur diesel at international price in addition to normal and Make it mandatory for cars to use low sulfur diesel only and car manufacturers to build car engines that use low sulfur diesel only.

This way car owners will benefit with better quality (Next Generation) engines. Government will not loose on sale of diesel and Pollution will be lower.
A few things here - as others have said diesel is the primary fuel for transportation of goods via road in all major economies - most of the developed countries within this group have low levels of inflation because they have addressed other supply-side bottlenecks, which in India are massive contributors to inflation.

On a separate note, do understand that the days of cheap oil are over. We haven't depleted all reserves but those that are being discovered are more difficult to extract. Oil prices, assuming continued dependence, will only go one way - up. Cutting taxes is a very short-term fix.

Taxing diesel cars is a very emotive and easy argument but it fails to make economic sense. Cars are the smallest component of diesel consumption in this country, so any additional revenue from this measure will be negligible. Not to mention, it penalizes a fuel/technology that is more thermally efficient than petrol. The real diesel users are transport and power back up.

Your low-sulfur argument is a good one but it ain't gonna happen until diesel is priced at market rates. Why? Because making refineries capable of producing ultra-low sulfur diesel requires a lot of investment and no company will want to make that investment if it can't make money on the end product.
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Old 6th January 2013, 06:46   #997
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by aim120 View Post
The fuel used for transportation of goods is diesel.This applies to USA and every European and Asian country.Every cargo ships use diesel.

Even the US military uses diesel powered humvee,LAV,IFV and trucks.
That's what I thought -that's why I couldn't understand - "In India, Diesel being prime fuel for transportation of goods, on road as well as on rails, our government can not afford to sell diesel at international rates."

Quote:
Originally Posted by StarScream View Post

Taxing diesel cars is a very emotive and easy argument but it fails to make economic sense. Cars are the smallest component of diesel consumption in this country, so any additional revenue from this measure will be negligible.
16% of all diesel used in India is used by cars and SUVs.
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Old 6th January 2013, 08:42   #998
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Originally Posted by carboy View Post
What about the other countries where Diesel costs more than Petrol? What is their prime fuel for transportation of goods?
Pretty simple. It is still diesel. Because of the cost of diesel, price of commodities is higher compared to India (if you consider economies of scale for certain products, such as meat, the lower cost still gives them required profit). This increases the cost of living and that should force people to increase their income.

By deregulating diesel at once, the government will have to redefine poverty line. One can no longer feed a family of 4 with 600 Rs/month (sarcasm intended).
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Old 6th January 2013, 08:57   #999
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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16%* of all diesel used in India is used by cars and SUVs.
*and growing, on account of an increasing amount of personal car users switching to diesels.
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Old 6th January 2013, 09:41   #1000
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

My 2 cents to this thread.
In Goa petrol costs 56rs to a liter compared to the general 75+ rest of country. How is this possible? Why are the other state governments not understanding the model and try to implement the same locally? (understand they have reduced the state taxes)

Why can't the government reduce taxes on petrol and diesel which will control inflation? Why are we not investing in nuclear technology for generating power so that malls and cricket stadiums do not have to use diesel powered generators?

Last edited by ku69rd : 6th January 2013 at 09:42. Reason: Addition
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Old 6th January 2013, 10:06   #1001
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Originally Posted by ku69rd View Post
My 2 cents to this thread.
In Goa petrol costs 56rs to a liter compared to the general 75+ rest of country. How is this possible? Why are the other state governments not understanding the model and try to implement the same locally? (understand they have reduced the state taxes)

Why can't the government reduce taxes on petrol and diesel which will control inflation? Why are we not investing in nuclear technology for generating power so that malls and cricket stadiums do not have to use diesel powered generators?
This has been discussed before. States have to generate revenue and one big chunk of it comes from fuel tax.

States like goa are small and their main revenue is coming from sources like tourism. Even before petrol prices were revised. Majority of taxi there are omni and bike rentals. Also their revenue from liquor sales seem to be more than that of petrol.
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Old 6th January 2013, 11:08   #1002
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by rajshenoy View Post
This has been discussed before. States have to generate revenue and one big chunk of it comes from fuel tax.

States like goa are small and their main revenue is coming from sources like tourism.
Rajesh,
See your point there, but we can't sit and twiddle thumbs around stating those excuses. Karnataka incidentally has the highest road tax in country followed with highest petrol taxes. There should be a balance in either one of them.
Bangalore is considered as beer city or pub city.
In totality have always felt that the fuel prices are an index of our countries corruption. Higher the rates higher the corruption.
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Old 6th January 2013, 11:18   #1003
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by ku69rd View Post
My 2 cents to this thread.
In Goa petrol costs 56rs to a liter compared to the general 75+ rest of country. How is this possible? Why are the other state governments not understanding the model and try to implement the same locally? (understand they have reduced the state taxes)

Why can't the government reduce taxes on petrol and diesel which will control inflation? Why are we not investing in nuclear technology for generating power so that malls and cricket stadiums do not have to use diesel powered generators?
State governments also get more revenue each time the prices of petrol is increased.The karnataka government being of BJP which is the same as in Goa has not reduced tax on petrol by one bit.We in bangalore pay around 59%(39% state tax and 20% center tax) of the cost of petrol as taxes.
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Old 6th January 2013, 11:22   #1004
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by ku69rd View Post
Rajesh,
See your point there, but we can't sit and twiddle thumbs around stating those excuses. Karnataka incidentally has the highest road tax in country followed with highest petrol taxes. There should be a balance in either one of them.
Bangalore is considered as beer city or pub city.
In totality have always felt that the fuel prices are an index of our countries corruption. Higher the rates higher the corruption.
Agreed, I am on your side buddy. but Chances of that happening in any big state(be it Karnataka or pick any other state) are extremely rare.

Infrastructure development needs funding too. They are constructing so many Flyovers on ORR for free isnt it ?
What i feel what can be done is reduce the tax percentage, Everytime center increases fuel price, state govt benefits too. That is something they should do. But with all the stupid political scenes happening here. God save Karnataka
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Old 6th January 2013, 12:01   #1005
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Pricing of commodities and fuel is vicious circle. You increase fuel price and all other commodities become costlier, finally asking for further increase in fuel cost. May be economists can explain it better. There was one wrong move to tax petrol more than diesel and price gap went widening to ridiculous extent.

If difference between petrol and diesel prices is reduced to 10% I am sure majority of car buyers will go for petrol heads as Diesel cars are expensive to buy owing to more complex and therefore costly technology. I agree, diesel engines are better and more advanced than petrol but most of diesel engines offered in India as on date are NOT that advanced. All high end and european origin cars available here either use previous generation engines or downgrade their engines to perform with lower quality diesel.

As I suggested making available ultra low sulfur (ULS) diesel at real market cost (without subsidy) and offering cars that run only on such ULS diesel can be just one solution.

I trust slowly all transport vehicles (Buses, Tempos, Trucks and Taxis) plying within metros are moving to CNG. Railways are going for electrification in big way so there is possibility of reducing overall national consumption of diesel and gradually bring diesel prices to rational level.
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