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Old 21st January 2013, 20:32   #1126
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

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Originally Posted by Jignesh View Post
Hello All,

We all know that bulk buyers of Diesel will now have to pay market rates for the fuel. Thus the cost of running State Transport Corporation Buses will increase to a large extent & they are under tremendous pressure to increase the (already very low) fares, which the political class will always oppose.

But today I read in one of the local news paper that the Private Transport Buses (read all the intercity Volvo buses) are not considered as Bulk Buyers & will continue to get Diesel at Subsidized prices.

Is this really true? I have my doubts.

But if it is really true then it is gross injustice. Because if Railways & State Transport Corporations (who truly do service to people without thinking much of profits) have to pay market rate for Diesel & Private Buses Companies which are making huge profits continue to get subsidized Diesel.

Can someone throw some light on this matter?

Thanks,
Private transports are already paying the full amount. Most of them have their own bunks, so buy at dealer price.
State transport, Railways, defense, power and mining get bulk rates which is Rs. 10/- cheaper than dealer rate. This is going to be removed.
It will still be cheaper than the so called subsidized diesel. As I mentioned in a previous post this will reduce under recovery almost totally.
So unfortunately, the diesel car owner who was being blamed for the whole under recovery is actually innocent.
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Old 21st January 2013, 20:39   #1127
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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
It is a not a question of Diesel car owners vs. the rest. The very same Govt which cries foul of private diesel cars is the one that allowed usage of diesel as private vehicle fuel. (Even now, if it is such a crisis, Govt can mandate to register all Diesel cars as Yellow board?). But, it is very lucrative to shift the blame from mobile companies, private malls to obvious symbols of well being (cars!).

With so called losses and subsidies too, Govt's revenues are only increasing with every liter of Diesel sale. The revenue deficit, expense surplus Govt is making the kill in the guise. If Govt can control its expenses (drop the fancy employment schemes?), taxes on both Diesel and Petrol (and what not). End of the day, there is no medicine for Govt not having spending discipline!
People (mis)used the subsidy when it was there. Govt turned a blind eye to the misuse as the leak was not huge, as initially it was only a few ambassadors that ran on diesel. Now that it has started to hurt, govt has decided to act. The fact that we enjoyed the subsidy so long does not entitle us to claim it for ever. If you bought a cow seeing the grass on the empty plot next to your house, you can't complain when the owner of the plot comes back to claim it. Congrats to all those who tasted free lunches while it lasted. Now, please move.
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Old 21st January 2013, 21:41   #1128
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

The government, or rather the Oil companies are not really interested in reducing the Oil Usage. If there was a honest view in that direction, why doesn't the Govt give lucrative subsidies to non-conventional sources of power .

I do not have any proofs, but somehow I have a feeling that the Oil lobby always make sure that R & D in non-conventional sources of energy or in alternate fuel vehicles are always pushed to the drains. I have heard of unconfirmed stories where Oil companies make sure that researches on alternate fuels that provided serious alternatives to Oil are hushed up by hook or crook. Anybody heard stories in this direction?

I do not mind buying diesel for unsubsidized prices, but then on a broader picture, I do not see the country having any benefit on this. The luxurious ways in which the government runs its business puts water on all the savings done by removing subsidy. If you have ever seen the amount being disbursed for the much talked about Rural employment scheme, you can understand how money is being wasted. 50 odd people together clean up 50 mts of a roadside for less than 50 mins and they get paid one full days of labor. A real mis-utilization of govt funds that includes your and my tax. Similar is the case with Hujj subsidies( not harm meant, I am a firm believer of "God in One"), and many such non productive government schemes that benefit a very minute percentage of the population and carried on just for cote bank politics.

To see wastage of public funds, we motor heads need not go anywhere else. Just see the conditions of hundreds of govt vehicles that "Rust in peace" in various govt departments. Those cars/jeeps have at least another 5 years of life left in them , if maintained properly.

My point is that its not subsidy that is increasing our deficit, but improper utilization of funds.

Last edited by nettooran : 21st January 2013 at 21:43.
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Old 22nd January 2013, 11:34   #1129
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

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Originally Posted by Hayek View Post
If the government of Kerala wants to subsidise KSRTC (a bad idea in my view since subsidised transport encourages wasteful journeys), it should do so directly - not have the tax payers from the rest of India bear that cost through cheap diesel.
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Originally Posted by thoma View Post
Wasteful journeys on a public transport system? And that too on the KSRTC? You could be joking.
I understand the inefficient usage of trucks example, but "wasteful journeys" on a state transport bus! I really don't understand that one! I can't speak for the Kerala State buses, but here in Bangalore, I use the bus to get to work whenever my bike is being serviced, and I can't imagine anyone using KSRTC (Karnataka State) city buses unless they absolutely had no other choice! (I'm not talking about the "AC Volvos", I'm talking about the "rush-hour-one-bus-every-hour-filled-to-capacity" type buses that are the rule rather than the exception!)

I don't have the technical knowledge to say whether subsidizing public transport makes sense in absolute macro-economic (or whatever) sense, but I can tell you what I've seen while traveling by bus. Once, there was this old man who got on the bus with his family. He pulled out what he thought was the bus fare, when the conductor informed him that it was actually more. The look on the old man's face told the story, and he and his family got off at the next stop.

Should he get a subsidy? I say yes!
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Old 22nd January 2013, 12:01   #1130
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

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Originally Posted by Hayek View Post
If the government of Kerala wants to subsidise KSRTC (a bad idea in my view since subsidised transport encourages wasteful journeys), it should do so directly - not have the tax payers from the rest of India bear that cost through cheap diesel.
It is not only KSRTC, all state transport companies will have to pay increased amount, while private transport vehicles are getting the fuel at reduced cost. So, in essence, state governments have to suffer losses, while private transport companies enjoy the benefit!

Actually, it has to be just the opposite - state owned companies have to get the Diesel in reduced rate, while private firms and cars have to be billed as per market rates.

One thing these government transport companies can do is to go to the nearby petrol pumps, pay the money, and fill the tank at the reduced cost! Why they need to buy diesel in credit and pay more?
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Old 22nd January 2013, 12:55   #1131
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

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Originally Posted by romeomidhun View Post
One thing these government transport companies can do is to go to the nearby petrol pumps, pay the money, and fill the tank at the reduced cost! Why they need to buy diesel in credit and pay more?
Already implemented at some parts of the country.

Quote:
Very soon, you will see buses belonging to KSRTC, BMTC, NWKRTC and NEKRTC lining up in front of private fuel pumps for refuelling.

The corporations, which used to get dedicated bulk supply from public sector oil marketing companies (OMC) directly to their depots, have decided to discontinue this practice following the steep hike in high speed diesel (HSD) prices for bulk consumers.
Source: http://www.thehindu.com/news/cities/...cle4329524.ece

Saw a similar article in today's paper regarding similar move in Kerala where some petrol pump association has offered to extend the credit facility to KSRTC just like they do for other government department vehicles.
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Old 22nd January 2013, 17:07   #1132
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Post Re: Rationalising diesel prices. *Update: 50p rise/month announced*

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Originally Posted by civic-sense View Post
People (mis)used the subsidy when it was there. Govt turned a blind eye to the misuse as the leak was not huge, as initially it was only a few ambassadors that ran on diesel. Now that it has started to hurt, govt has decided to act. The fact that we enjoyed the subsidy so long does not entitle us to claim it for ever. If you bought a cow seeing the grass on the empty plot next to your house, you can't complain when the owner of the plot comes back to claim it. Congrats to all those who tasted free lunches while it lasted. Now, please move.
I agree with this but differ in treating this as piecemeal. As you know, till the time rating agencies pushed, the "subsidy" or price did not become big and was untouched.

Govt Revenue = Taxes - Subsidy
OMC Revenue = Consumer Price + Subsidy - (costs + taxes).

You could see, in any case / state both revenues are positive. So what loss are we talking about? It is just a media hog wash that Govt is losing money on Diesel sale. It is probably the lost sale of petrol / opportunity value of higher revenue that is hurting..

Mobile companies are using Diesel for their profits; if you increase Diesel price, Govt can reap more revenue. But, isn't this lower price a reason for lowest tariffs we have? US / Europe have market linked fuel prices. But are their tariffs comparable to India? Effectively, the telecom bills would also go up !

And what is the point of raising Diesel price? But, wouldn't that move make everyone get hurt? If the point is to avoid the switch to Diesel cars, then why not reduce petrol price?

In short, keeping both petrol and diesel prices doesn't mean that both would have to be higher (along with every other price one can think of!).

PS: In college days, we use to kid "We don't keep butter in one eye and Lime is not correct, so put lime in both!"
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Old 22nd January 2013, 18:42   #1133
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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
I agree with this but differ in treating this as piecemeal. As you know, till the time rating agencies pushed, the "subsidy" or price did not become big and was untouched.
Yes. It was when the rating went down, when the FIIs started pulling out, when the price of dollar started rising. I agree that they should have addressed it long ago, and not wait till the very end.
Quote:
Govt Revenue = Taxes - Subsidy
OMC Revenue = Consumer Price + Subsidy - (costs + taxes).

You could see, in any case / state both revenues are positive. So what loss are we talking about? It is just a media hog wash that Govt is losing money on Diesel sale. It is probably the lost sale of petrol / opportunity value of higher revenue that is hurting..
When tax revenues go down, your budget plan goes for a toss. Revenue being positive isn't enough, you have to meet the budget target.
Quote:
Mobile companies are using Diesel for their profits; if you increase Diesel price, Govt can reap more revenue. But, isn't this lower price a reason for lowest tariffs we have? US / Europe have market linked fuel prices. But are their tariffs comparable to India? Effectively, the telecom bills would also go up !
Mobile bills will go up, but already the tariffs are rock bottom, and hence a little hike will not hurt.
Quote:
And what is the point of raising Diesel price? But, wouldn't that move make everyone get hurt? If the point is to avoid the switch to Diesel cars, then why not reduce petrol price?
When a stitch is done, the wound hurts. It is beneficial in the longer run.
Quote:
In short, keeping both petrol and diesel prices doesn't mean that both would have to be higher (along with every other price one can think of!).

PS: In college days, we use to kid "We don't keep butter in one eye and Lime is not correct, so put lime in both!"
Taxes on both can be lowered provided they can find an alternate revenue. Maybe you have something to suggest.
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Old 22nd January 2013, 18:57   #1134
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Post Re: Rationalising diesel prices. *Update: 50p rise/month announced*

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Originally Posted by civic-sense View Post
...
When tax revenues go down, your budget plan goes for a toss. Revenue being positive isn't enough, you have to meet the budget target.
...
Taxes on both can be lowered provided they can find an alternate revenue. Maybe you have something to suggest.
Spot on! The reason for all the trauma is the lack of financial discipline at Govt. Why spend something when revenues don't match? If expenses are high, shouldn't they look at bringing about efficiencies in the system first? (Be it the 300+ cylinders / year for elected ones to loong motorcades to Spectrum / mine auctions the options are just so varied).

At the risk of going OT: They can drop all the fancy ideas / schemes (Food security to employment guarantee, any scheme; agreed that these kind of schemes are needed for humanity sake, but they can also define some meaningful work done out of these!)
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Old 22nd January 2013, 19:13   #1135
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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
Spot on! The reason for all the trauma is the lack of financial discipline at Govt. Why spend something when revenues don't match? If expenses are high, shouldn't they look at bringing about efficiencies in the system first? (Be it the 300+ cylinders / year for elected ones to loong motorcades to Spectrum / mine auctions the options are just so varied).
I agree that there is a lack of discipline. Suppose, they fix it, and save us from a hike, but what happens next time? You can't keep cutting the same tree.
Quote:
At the risk of going OT: They can drop all the fancy ideas / schemes (Food security to employment guarantee, any scheme; agreed that these kind of schemes are needed for humanity sake, but they can also define some meaningful work done out of these!)
Takes us back to the age old argument. Cut everything that is of no benefit to me, leave the diesel subsidy intact cos I have a diesel car.
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Old 23rd January 2013, 01:49   #1136
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

Diesel prices and delhi rape case seems to be the hottest topic wherever i go; office, family, friends !

BMTC started filling from consumer fuel outlets, i could see atleast 20 buses waiting in queue for filling diesel near HSR depot. Off topic, Interestingly, none of the buses were switched off while they were waiting for their turn to refuel. Since i was standing there waiting for someone, i could notice that there was atleast 10 minute waiting period per bus and all the time buses were on and idling. Same with cabbies/TT drivers. None of the drivers are bothered about reducing wastage but are keen on increasing fares !

While subsidy and its removal comes with pros and cons, i am for increasing fuel prices and making it dearer so that the wastage and pollution becomes lower. Wishful thinking !
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Old 23rd January 2013, 21:35   #1137
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

For a developing country like India where a large chunk of people live under poverty, it is imperative that subsidized fuel needs to be provided. Diesel is the main fuel and raising it's price will make cost of living higher. Thus the whole policy of fighting for the aam aadmi becomes defunct. They need to at least reduce some of the tax on fuel to make it cheaper. I do not support this move of increasing fuel price to match the market rate. It is not right for a poor country like India.

Cheers!
Rohan
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Old 27th January 2013, 17:44   #1138
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

There is something serious wrong with this government if it things its OK for public transport cos to pass on the higher fuel bill due to Rs.11 per litre hike (for bulk customers) to the common man utilising those services, while allowing that fuel guzzling SUV to run around on a meagre 50 paise per litre hike in fuel bill.

Its NOT "Theek Hai" Mr.PM.
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Old 27th January 2013, 18:36   #1139
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Exclamation Re: Whats the impact of Rs.11 hike for bulk users of Diesel

Here in Karnataka, KSRTC used to increase fares with every small revision in diesel prices. Even a Rs.2 increase would result in some increase in fare. However, after the supposed hike of Rs.11 for bulk users, I still do not see any news about hike in fares.
Is it government preparing for elections or am I missing something important here
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Old 27th January 2013, 18:53   #1140
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Default Re: Rationalising diesel prices. *Update: 50p rise/month announced*

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Originally Posted by rjalihal View Post
For a developing country like India where a large chunk of people live under poverty, it is imperative that subsidized fuel needs to be provided. Diesel is the main fuel and raising it's price will make cost of living higher. Thus the whole policy of fighting for the aam aadmi becomes defunct. They need to at least reduce some of the tax on fuel to make it cheaper. I do not support this move of increasing fuel price to match the market rate. It is not right for a poor country like India.

Cheers!
Rohan
I my opinion it is the "Public Transport" and not the fuel which needs subsidy. Subsidized fuel does lead to a lot of inefficient use, but I have yet to see a subsidised public transport being used "inefficiently" by the public.

In a lot of countries the Public Transport system is subsidised not only to help the the less affluent, but also to encourage the shift to public transport from private cars.

The argument of continuing with subsidy for diesel is practically on the same lines as not letting the owners raise the rent for commercial buildings - the existing tenants (who may be paying a pittance) plead that market rents will make their business unviable, where does that leave the owners who at times cannot even recover the maintenance costs from rent.

It is high time we realised that certain commodities cost lot more today than they did even a decade ago. As we are adjusting our life style with the increase in food prices, so we must accept higher fuel costs. With dwindling reserves, the prices of petroleum based fuels will be steadily going north.

As some have pointed out the subsidised diesel results in a lot of wasteful consumption. Once the diesel is priced at market rate a lot of waste will be eliminated, and the resultant transportation costs will not rise in tandem with the fuel prices.
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