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Old 6th January 2013, 14:47   #1006
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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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?
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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. 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.
As Raj Shenoy said other states are more dependent on the revenue from the fuel tax. Incidentally, Goa is heading for a fiscal crisis. The biggest industry in the state in not tourism, it's iron ore mining and that has been banned in one swell swoop by the Supreme Court because of (perceived or true) illegalities and environmental degradation. That is a huge chunk of revenue that has dried up. I'd be curious to see, in light of the changed scenario, how long Goa can continue with this fuel-pricing strategy.

As far as nuclear is concerned, we are trying our best to set up more plants but two things are in the way: nuclear suffers from the not-in-my-backyard problem. Hence every plant is faced with massive protests from the anti-nuclear lobby. Fukushima has only made these protests stronger. The second issue with nuclear in India is what I call the Bhopal fixation. Every country that enters the global trade in nuclear equipment has to have a liability law to fix who is responsible for damages and for how much if a problem occurs. Ours seeks to put unspecified damages on equipment suppliers such as GE, Areva etc. Thus with such an open-ended law no global company wants to deal with us. Even Kudankulam is suffering because of this, even though it was set up under a Indo-Russian bilateral agreement in 1988.

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Originally Posted by CANPUSH View Post
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.
Fuel price increase = higher commodity prices - is not necessarily true. Fix supply-side bottlenecks (infrastructure, wastage, storage) and fuel price increases will matter lesser and lesser. What is not apparent to a lot of people is that we pay for a growing fiscal deficit, because of a massive diesel subsidy, in high interest rates, low growth, other taxes.

And this differential in petrol and diesel taxes is a recent phenomena. Taxes on diesel were cut to limit the price increase - exacerbating the difference. It wasn't always the case.

Diesel engines in India are as advanced as anywhere else in the world - same turbos, same direct injection systems. The only thing missing, to cope with our diesel quality, is emissions technology. For example, the Renault K9K is sold in Europe as well and meets those emission standards. The Honda small diesel is another example- 1.6l with emissions tech sold in Europe, downsized to 1.5l in India to meet tax norms and minus the emissions tech. For these companies to make their engines run cleaner on ULS diesel is very little effort. What this means is that from an emissions standpoint the petrol engines sold here are much cleaner than diesel engines.

I also do not think that diesel and petrol car-price differential is because of the more expansive tech - that cost, to an extent is offset by the absence of spark plug and ignition coil set ups in diesel engines. For diesel the technology has been around for a while and it's now coming to petrol - will then petrol cars be priced on par? I don't think so. There is an element of price gouging by manufacturers. This is an interesting space to watch, starting with Ford Ecosport and 1l Ecoboost variant vis-a-vis the diesel variant.
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Old 7th January 2013, 12:28   #1007
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Let me explain, the consequences of Fuel price increase with an example.


Imagine, if a company is providing its employees free lunch.
Suddenly, all employees ask for raise in money.
So the company increases pay of all employees by INR 1000 and deducts INR 1000 of each employees saying Food will be charged.

Eventually, short sighted employees might feel satisfied that the pay has increased. But the end result in Zero.

Likewise, Indian govt is subsidizing diesel fuel for all of its citizen (so now citizens are happy thinking its cheap). But later it ends up collecting more money in form of Income tax, or sales tax etc just to ensure the deficit out of subsidizing is met.

Now the end of this is a zero sum game. Its just that some citizens like the employees mentioned above are short sighted all they see is the increase in salary are satisfy themselves.

Only thing that can reduce fuel price is global market fuel price should reduce. Other than this anyone playing with subsidizing etc is only playing with theories of economics and will eventually fail
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Old 7th January 2013, 14:19   #1008
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

I had started a new topic on Goverments plan to increase the Diesel price by Rs. 10 by 1 Rupee/ Month. But some how unable to see that post at all.

Hence asking the question here, assuming the diesel gets hiked by Rs 10 what will be your advice for folks who are planning to by a new car .. Shall they go ahead for Diesel or petrol.

Before this RS 10 thing diesel was outright yes. But the calculations in Economic times are showing longer times and longer distances 60000 KM - 80000 KM for diesel premium to be recovered. Your thoughts please...
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Old 7th January 2013, 14:42   #1009
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by rajesh.sml View Post
I had started a new topic on Goverments plan to increase the Diesel price by Rs. 10 by 1 Rupee/ Month. But some how unable to see that post at all.
Your thread was deleted since the topic was already being discussed. Good to see that you searched and reached the correct thread
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Old 7th January 2013, 14:54   #1010
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by rajesh.sml View Post
I had started a new topic on Goverments plan to increase the Diesel price by Rs. 10 by 1 Rupee/ Month. But some how unable to see that post at all.

Hence asking the question here, assuming the diesel gets hiked by Rs 10 what will be your advice for folks who are planning to by a new car .. Shall they go ahead for Diesel or petrol.

Before this RS 10 thing diesel was outright yes. But the calculations in Economic times are showing longer times and longer distances 60000 KM - 80000 KM for diesel premium to be recovered. Your thoughts please...
I think this has been discussed innumerable times on this thread as well as others.

To put it in nutshell, even at today's price differential, unless you drive 18K Kms every year, buying a diesel car doesn't make sense in the Total Cost of Ownership.

Do the maths in excel and you'll know.

Cheers
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Old 7th January 2013, 15:04   #1011
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by xingamazon View Post
Now the end of this is a zero sum game. Its just that some citizens like the employees mentioned above are short sighted all they see is the increase in salary are satisfy themselves.

Only thing that can reduce fuel price is global market fuel price should reduce. Other than this anyone playing with subsidizing etc is only playing with theories of economics and will eventually fail
I wish it was just zero sum. For every rupee of the subsidy we are probably paying at least three in taxes given the 'efficiency' of our system. Also, if the deficit is seriously brought down the rupee will appreciate making imports (incl. oil) cheaper.
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Old 7th January 2013, 15:32   #1012
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by rajesh.sml View Post
I had started a new topic on Goverments plan to increase the Diesel price by Rs. 10 by 1 Rupee/ Month. But some how unable to see that post at all.

Hence asking the question here, assuming the diesel gets hiked by Rs 10 what will be your advice for folks who are planning to by a new car .. Shall they go ahead for Diesel or petrol.

Before this RS 10 thing diesel was outright yes. But the calculations in Economic times are showing longer times and longer distances 60000 KM - 80000 KM for diesel premium to be recovered. Your thoughts please...
Still, if you TD today's petrol and diesel variants back to back, you would feel the drive ability of diesel is better than its petrol siblings. The modern diesel engines are more updated technically. At times I drive my beat diesel like an auto transmission in my street But if you are with just in terms of economical factors, then after this Rs.10 hike a petrol variant should be a better choice.
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Old 7th January 2013, 15:48   #1013
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

I remember seeing a few months back where someone had shared a link with the break-up of petrol & diesel prices - the link was from one of the oil companies. I remember the "subsidy" being 10/11 Rs at that time. Most junta on either side (for/against diesel price hike) had more or less agreed to that post.

Considering that the price had been increased by 5Rs recently, I wonder how the price still needs to be increased by another 10Rs.

P.s. I believe the oil prices have gone up and come down; the overall effect should be same.
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Old 7th January 2013, 21:29   #1014
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by ninjatalli View Post
I remember seeing a few months back where someone had shared a link with the break-up of petrol & diesel prices - the link was from one of the oil companies.
======
P.s. I believe the oil prices have gone up and come down; the overall effect should be same.
The subsidy is still around Rs9 but they still collect more taxes then the subsidy they give.I guess the reason behind this is our tax payers money first needs to get filtered into the politician pockets.I also wonder why the tax on fuel is less in delhi and so is the road tax.
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Old 8th January 2013, 01:03   #1015
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^^^^^^ that link was shared by me.... cost of diesel and petrol from the refinery is almost equal: about 45-46 ....rest is taxation by centre and state governments....

So every time I hear about government stats about fuel subsidies, I hear them clamoring for more taxes rather than "abolishing subsidies". After all fuel taxation is the no.1 revenue source for the government!
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Old 9th January 2013, 01:05   #1016
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Direct Cash Transfer as a subsidy tool, is taking its time to settle down. By standard govt. efficiency its already in the news for the wrong reasons. So for this to come to Diesel it will atleast take 3 -5 years. Price hike seems to be only option for Diesel atleast in the medium term. With the election year coming up, there will not be -ve sentimental movement on the prices. Going by the D - P split from Dec sales figures, diesel cars seem to be only ones selling for many variants. The only way the govt can control private D cars is to restrict sales of Diesel in the tier 1 and 2 cities/towns, ration it otherwise as a deterrence. Honda - D, i10 - D and fially Alto - D will be the final nail in the coffin for petrol as a fuel for cars in India. Crazy times we live in.
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Old 9th January 2013, 08:44   #1017
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by drsingh View Post
After all fuel taxation is the no.1 revenue source for the government!
Sales and other indirect taxes are at the bottom of the list when it comes to govt revenues, and amounts to less that 10%. Fuel forms only a small part of the sales tax revenues.

Corporate tax, income tax, customs, excise duties etc form the major chunk.
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Old 9th January 2013, 09:16   #1018
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^^^^^ corporate tax and excise tax are largest contributors....

As a sector petroleum contributes the most....

" The top five industries for central excise revenue are
petroleum and petroleum products 42%, cigarettes and
other tobacco products 8%, iron and steel products 8%,
cement 5% and automobiles 4%."

www.countercurrents.org/mukherjee260610.htm

^^^^^^ makes for interesting reading..

Last edited by drsingh : 9th January 2013 at 09:18.
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Old 9th January 2013, 10:19   #1019
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by drsingh View Post
^^^^^ corporate tax and excise tax are largest contributors....

As a sector petroleum contributes the most....

" The top five industries for central excise revenue are
petroleum and petroleum products 42%, cigarettes and
other tobacco products 8%, iron and steel products 8%,
cement 5% and automobiles 4%."

www.countercurrents.org/mukherjee260610.htm

^^^^^^ makes for interesting reading..
Wow, this is an eye opener. I am sure the govt is aware of this. Why cant they tax the tobacco products higher?
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Old 9th January 2013, 10:24   #1020
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by ninjatalli View Post
I remember seeing a few months back where someone had shared a link with the break-up of petrol & diesel prices - the link was from one of the oil companies. I remember the "subsidy" being 10/11 Rs at that time. Most junta on either side (for/against diesel price hike) had more or less agreed to that post.
Quote:
Originally Posted by drsingh View Post
^^^^^^ that link was shared by me.... cost of diesel and petrol from the refinery is almost equal: about 45-46 ....rest is taxation by centre and state governments....
Here are the links for you reference gentlemen:

Price build up for Diesel.

Price build up for Petrol.

For any other fuel, refer to this link.
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