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Old 29th June 2011, 08:17   #106
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

@simplyself, That's the part of the scam.
After charging 49% duty in various forms, The government gives a 14% subsidy. This still works out to more than 35% tax as opposed to the normal 12.5 sales tax.
Fuel is a milch cow which every govt. wants to milk dry.
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Old 29th June 2011, 10:13   #107
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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@simplyself, That's the part of the scam.
After charging 49% duty in various forms, The government gives a 14% subsidy. This still works out to more than 35% tax as opposed to the normal 12.5 sales tax.
Fuel is a milch cow which every govt. wants to milk dry.
Rightly said! All these companies that claim losses to the tunes of hundreds of crores per day, surprisingly, will post HUGE profits YoY. How is that even possible? If I remember right, IOCL posted 10,000 crores profit last year.

These guys hire Dhoni, Narain etc for fancy ads despite the claim of losses.

We need Anna Hazare'esque movement to bring out this scam. Price it right, and levy the right tax. NO taking with right hand and passing on to left hand.

IMO, I think Shell Prices are real prices. If Shell can sell petrol @ 71.95 Rs in Bangalore (WITHOUT SUBSIDY), how can price at Govt bunks be 71.45 (WITH 25 Rs Subsidy)? I don't believe Shell can sell it at a loss.
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Old 29th June 2011, 13:28   #108
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Agreed. Diesel cars cost more but remember in used car market diesel car sells at a premium compared to petrol. He may recover his 70~80K after 4 years minus the interest. But by that time he would have clocked atleast 50K kms and petrol to diesel difference is pure savings.
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Old 9th July 2011, 22:35   #109
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

read this article in ET.
http://articles.economictimes.indiat...e-cash-subsidy

Nandan nilekani (UID chairman) has suggested that LPG can be sold at market prices and later poor consumers get back reimbursement into their bank accounts linked to their UID.
Now this approach can also be used fro diesel.
Agreed that this will also have many loopholes like proxy...If tuned, this can slim down the subsidy usage.
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Old 10th July 2011, 00:51   #110
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by sriramv.iyer View Post
Rightly said! All these companies that claim losses to the tunes of hundreds of crores per day, surprisingly, will post HUGE profits YoY. How is that even possible? If I remember right, IOCL posted 10,000 crores profit last year.

These guys hire Dhoni, Narain etc for fancy ads despite the claim of losses.

We need Anna Hazare'esque movement to bring out this scam. Price it right, and levy the right tax. NO taking with right hand and passing on to left hand.

IMO, I think Shell Prices are real prices. If Shell can sell petrol @ 71.95 Rs in Bangalore (WITHOUT SUBSIDY), how can price at Govt bunks be 71.45 (WITH 25 Rs Subsidy)? I don't believe Shell can sell it at a loss.
Exactly my point. The OMCs post profits, their stocks sell hot on Indices, they still whine about making losses.

All this is notional loss. Not all of India's requirement is imported. But they calculate the international crude price and say they ought to get certain price for domestic crude too.

Every other fuel dispensing station is made over every couple of years at huge expenditure. Where does that money come from.

I have seen OMCs spend huge amounts on providing highway amenities to truckers. It is all limited to having constructed huges swathes of buildings for dining, rest etc but I am yet to see a single truck driver using these facilities. A few cater to a very few motorists (invariably those travelling with families) and many are downright abandoned.

Remember the TCL ads a decade and a quarter ago. The Ad said it doesnt employ a hot shot model for promotion so that it can save on the ad budget and pass on the benefits to the customer.

I still do not get the point that how a Dhoni or a Tendulkar can influence us to buy fuel from a particular OMC.

Petrol, as of now, @ 70 - odd, is without subsidy.

The Govt Ad justifying the diesel/gas and kerosene price says it still subsidizes
diesel to the tune of Rs. 6.13 / litre. Remove the subsidy, nothing earth shattering happens. We may see a rise in commodities' prices. Afterall, the fuel prices are supposed to be linked to the crude prices. Whenever the crude comes down, then the fuel prices too come down.
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Old 10th July 2011, 22:07   #111
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Fuel prices will never come down. It is a scam that has been active since pre-independence.
The point I would like to make is that diesel if dual priced, should be subsidized for private individuals and not for commercial industry.
My personal experience, when traveling in a bus, if the ticket is Rs.7.50, the conductor will collect Rs.8, if he doesn't have change. Now why doesn't he subsidize the ticket and give it for Rs.7?
Or try telling the taxi driver to subsidize your fare by Rs.5, Or if you've ever shifted your family between towns, try asking the movers for a subsidy, or the guy transporting potatoes from your farm, None of them would give you a quarter. I don't see why we should subsidize fuel for them.
But the guy driving the BMW or merc, will at least drop a few coins in a beggars plate, will pay some tax, will not overload his vehicle and spoil the road. He may be given a subsidy, which he does not really want. He should not be penalized just because he can afford an expensive car. We do not live in envy.
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Old 11th July 2011, 08:19   #112
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by wildsdi5530 View Post
But the guy driving the BMW or merc, will at least drop a few coins in a beggars plate, will pay some tax, will not overload his vehicle and spoil the road. He may be given a subsidy, which he does not really want. He should not be penalized just because he can afford an expensive car. We do not live in envy.
You have got to be kidding me!!

By that logic, I deserve a subsidy as I pay complete taxes (no fake HRA receipts/medical bills/fuel bills/car lease agreements to save tax - unlike many others).

And how is paying market price of a product a penalty? If it is, then maybe we should get subsidy on buying houses and all other luxury items we buy!
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Old 11th July 2011, 08:40   #113
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by wildsdi5530 View Post
Fuel prices will never come down. It is a scam that has been active since pre-independence.
The point I would like to make is that diesel if dual priced, should be subsidized for private individuals and not for commercial industry.
My personal experience, when traveling in a bus, if the ticket is Rs.7.50, the conductor will collect Rs.8, if he doesn't have change. really want. He should not be penalized just because he can afford an expensive car. We do not live in envy.
I have to admit I am in great awe of your athletic abilities. The leap of logic that you have exhibited in your post is truly of olympian proportions.

The fact of the matter is that all subsidies are bad and inherently inefficient. Having said that one has to understand that social justice and political compulsions make subsidies a necessary evil to an extent.

Coming back to the subject at hand, diesel pricing policy in India is absolutely senseless from a practical standpoint and needs to be junked and market pricing introduced. That is however a utopian situation which is NOT going to become reality for a wide variety of reasons. So then what is the situation going to be? Diesel subsidy will continue whether we like it or not.

If subsidy is going to continue, then I will be damned if my tax rupees are going to subsidize the diesel usage of those who do not need a subsidy. Either the government curbs the subsidy bill by formulatiing an end use based subsidy or imposes taxes on diesel vehicles which are not used for agriculture/defence/goods transport. Since the former is not happening the latter has to happen. If someone needs a diesel personal vehicle, they should have the freedom to buy and use it. Make sure the fuel subsidy they are going to enjoy is recovered from them upfront. Is this equitable? To the vehicle buyer no, to me yes. At the end of the day I am concerned with me, as you are with you. Simple as that!

Last edited by RS_DEL : 11th July 2011 at 08:50.
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Old 11th July 2011, 08:52   #114
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Originally Posted by wildsdi5530 View Post
just because he can afford an expensive car. We do not live in envy.
You have answered yourself as to why he should not be given a subsidy.
We do not live in envy...The reason behind the subsidy thing is actually the opposite.
It is because we understand human problems and we are concerned about people who are not well off.

Subsidy is not a penalty but a support.
It is a support from the government for people who cannot afford basic things.
It is a support from the goverment to encourage poor to come up in life for example by starting a small business, by farming, etc..

Yes, just because he can afford it, The merc guy should not be getting the subsidy.

So, the present system of subsidy must go and some other mechanism should be deviced to give this "encouragement / support"
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Old 11th July 2011, 12:37   #115
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

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Subsidy is not a penalty but a support.
It is a support from the government for people who cannot afford basic things.
It is a support from the goverment to encourage poor to come up in life for example by starting a small business, by farming, etc..
The owner of a fleet of trucks, the national railways, corporates with mega generators, are people who cannot afford basic things?
The fuel subsidy that you give a bus does not translate into a free ticket for someone. It just means more profits for the company. Fuel subsidy does not provide the truck driver a meal, it just helps in profits. A small business does not use enough diesel to make a profit on the subsidy offered. A farmer pays Rs.750/hr as rent for a harvester whether it uses 1 L of diesel or 100L.
The solution I think is to make fuel like any other commodity. with an MRP and sales tax. Instead of hiding behind duties, octroi, cuts, state and central funds, and even subsidy, make the pricing transparent. Like gold for example, whose rates changes everyday, but is transparent (not talking about jewels).
I don't mind paying even 200% sales tax or paying Rs. 100 for a litre of diesel or petrol (for example), I will have the satisfaction of contributing to the economy. But do not make me lose my self respect by robbing me blind with hidden charges and then throwing alms saying it's a subsidy.
I believe India should be free. Where a man may live his life working hard and reaping it's benefits, rather than live off the so called state benefits.
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Old 11th July 2011, 14:13   #116
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by wildsdi5530 View Post
The owner of a fleet of trucks, the national railways, corporates with mega generators, are people who cannot afford basic things?
The fuel subsidy that you give a bus does not translate into a free ticket for someone. It just means more profits for the company. Fuel subsidy does not provide the truck driver a meal, it just helps in profits. A small business does not use enough diesel to make a profit on the subsidy offered. A farmer pays Rs.750/hr as rent for a harvester whether it uses 1 L of diesel or 100L.
The solution I think is to make fuel like any other commodity. with an MRP and sales tax. Instead of hiding behind duties, octroi, cuts, state and central funds, and even subsidy, make the pricing transparent. Like gold for example, whose rates changes everyday, but is transparent (not talking about jewels).
I don't mind paying even 200% sales tax or paying Rs. 100 for a litre of diesel or petrol (for example), I will have the satisfaction of contributing to the economy. But do not make me lose my self respect by robbing me blind with hidden charges and then throwing alms saying it's a subsidy.
I believe India should be free. Where a man may live his life working hard and reaping it's benefits, rather than live off the so called state benefits.
mate,
That is why I mentioned that this subsidy system must go and the "encouragement/support" must go to the targetted group of people through some other mechanism, rather than everybody including the people who can afford it.

By the way considering your example, 7.5Rs is the fare with the subsidised fuel price.
It would have been 8 If the fuel were not susidised.
Diesel price increase directly affects prices of all the goods...This is what is preventing governments from removing the subsidy now.

The conductor not giving you the change is some other issue altogether.
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Old 11th July 2011, 19:40   #117
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

The component of fuel cost is about 50% for Airlines and < 25% for road transport, still we have transporters jacking up prices more than the increase in fuel costs. It is high time that Government oversees the pricing of the transportation sector vis a vis fuel price variation. If the fuel prices are deregulated, then all will benefit from transparency in transportation costs, other wise increase in fuel prices is taken as a carte blank to increase the prices, to what ever the market can bear. (No one decreased the prices when the fuel costs went down).
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Old 13th July 2011, 00:36   #118
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

@Aroy, Would you know what the cost per litre of diesel to the Indian Railways and state transport corps?
And the cost per litre of aviation fuel to Indian airlines?
Perhaps that would give us an idea of the govt's plunder.
@hemanth.anand If the 50Ps increase in the ticket cost will dissolve the so called subsidy, I'm sure everyone will be happy to pay it. Atleast we won't have to hear how much the govt. is protecting the economy. "Diesel price increase directly affects prices of all the goods" that's what keeps inflation inline. Otherwise we have the current scenario where prices are artificially inflated and is susceptible to a crash.
Capitalism is the way to go. Or pure communism. This in-between way is failing for sure. To achieve communism, we should be willing to live for everyone else while sacrificing our lives. A capitalist is willing to sacrifice everyone else for personal needs if need be. If we try to sacrifice some people (BMW owners) for the sake of some others (transport corporates), only the common man who pays taxes will suffer.

Last edited by wildsdi5530 : 13th July 2011 at 00:37. Reason: Spelling mistake
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Old 13th July 2011, 14:40   #119
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

The key issue is subsidy cannot be removed for fear of inflation which will instabilize an already unstable govt. Many members have suggested removing subsidy for expensive cars or passenger cars etc.

Consider the way fuel is sold. The farmer with a harvestor/tractor, will often come and take 50L of diesel in cans on a bike (since its cheaper than coming on the tractor). So if you say subsidize him, or the transporter who buys in bulk and has his own underground storage. This automatically leads to SUV owners sending drivers to fill in cans on bikes, saying they are farmers, or the transporters black marketing diesel.

So the other option is one time tax on buying a car. This again cannot be applied to trucks/tractors/buses/tempos etc., for fear of inflation. For the car segment, if a hotel/taxi operator owns a car, additional tax on them will lead to higher prices. (while it may be considered outside of necessities, the economic impact is there).

So then if we tax all white plate registered cars at say 10% of ex. showroom, there is a new problem, where businessmen will register their personal use cars in yellow plates in the name of their businesses. Company leased cars will all be registered yellow. Same for any other private citizen having links to acquiring a business address.

Indians will try to find ways to evade this tax as long as their is a loophole. Some farmers in the US have been registering their Audi's as farm equipment in the same vein (news in autoblog.com today).

The only option is to remove subsidies for all segments and lower the tax by 95% of the amount. So a 2-3% increase in retail diesel prices keeps the PSU's happy and the inflation in check. Govt is not affected overall, but the payout of older subsidy bonds and sharing of tax between centre/states needs to be worked out.
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Old 13th July 2011, 19:02   #120
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Default re: Rationalising diesel prices*Update: 50p rise/month announced*

Quote:
Originally Posted by wildsdi5530 View Post
@Aroy, Would you know what the cost per litre of diesel to the Indian Railways and state transport corps?
And the cost per litre of aviation fuel to Indian airlines?
Perhaps that would give us an idea of the govt's plunder.
I do not have exact figures, but this is what is the industry norm

1. For bulk users of diesel, the price is less the commission paid to pump owners, lower transportation cost (as they can organize their own transport) and bulk discounts. For railways this would mean a discount of at least 10%. If any excise benefit is given, as to the defense ministry, then expect even lower prices.

2. Aviation Turbine Fuel (ATF) prices are quoted in news paper every time it goes up. Last I noted it was around 55/l - compare that to 40-45 for diesel!
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