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Well, my assumptions were drawn from the report, I realized I have no knowledge of the petroleum refining process. I did know to the extent of both being byproducts from my general knowledge but no details of the latest
processes followed for that matter. I was trying to reason it out!

Ok this is going to be OT.

Definition of capitalism per wikipedia-> Capitalism is an economic system in which the means of production are privately owned and operated for profit, usually in competitive markets.

If you desire capitalism then let us have it in the energy sector too, rather than the state sponsored perverse pricing policy that we are suffering.

Let me get rhetorical here. Why capitalism just for the automobile manufacturers and not in the energy sector? Let them compete and survive in a scenario where they sell diesel cars and petrol cars based on the value proposition they offer to the buyer - WITHOUT any crutches being provided to either choice . Right now they are walking on crutches provided by the government, albeit inadvertently , the price of which is being paid by the citizens.

See. thats the solution. The middle class does not like to enjoy benefits, if that means their peers can enjoy benefits too.
So if you ask a upper middle class car owner.
I will increase you salary 100%, and increase your neighbors salary by 200%, or I will decrease your salary by 50% and decrease your neighbors salary by 75%, most will choose the latter.
So this is the case here. Lot of people want "2 tier" pricing. Now this will not mean that suddenly govt will say "no subsidy on diesel, so now you pay 20% tax".
Top tax slab will still remain 30%, because now instead of subsidy being handled to their peers with diesel cars, subsidy will go to petrol pump owners, which are not their peers and come in a different slab.

So end result, same tax burden on GOI, overall increase in costs, less money for many households, decrease in their salaries because their companies which get 2 hours of electricity a day will now burn more expensive diesel.

But end result will be happiness, because their neighbor with diesel car got a bigger hit than them :p

Power is classified as a basic need, while a car is definitely not, and never will! So i don't think that argument is valid in this case.
Runaway prices for power would increase cost of production and expenses of every household. Quite similar to the argument that i put forward wherein diesel prices are increased, although impact of increase in prices of power, would be much more.

Automobile manufacturers didn't ask for the subsidy in the first place. They're simply making profits on the government's policy.
Regarding the extra premium they're charging for diesel cars, the manufacturers are still open to competition, even if one single manufacturer comes forward with a successful new diesel car, cheaper than the competition, the others will have to follow suit. Competition is best for the customer.

Besides I've also suggested higher taxation on diesel cars, along with gradual price increase of diesel, as an alternative and immediate solution to the Petrol & Diesel price disparity, which would lead to decrease in subsidy and an eventual end to it.
Did you read my entire post btw? Please try commenting on the whole of it and a valid argument on the entire post, not just one single point, which solitary seems controversial.

Cheers.


Exactly my point! :uncontrol

You have very aptly represented the reality . Any expectation of a drastic change in the diesel pricing norm is just wishful thinking far removed from reality . Pricing parity of petrol-diesel can only happen in the medium term if the crude prices crash ( unlikely) , else the petrolheads would have to continue to grin and bear the Rs20 / lt price differential

What I am unable to understand is why should people shy away from paying a fair price for what they consume and present arguements, which fail on the test of rationale and fairness, to justify the ride on the gravy train? To exist in a flawed environment that is not within our control is fine, but to justify it's flaws - that is beyond the pale of reason.


I work in that part of the economy where the first rule is there is a price that is market determined for what you need/want. Be prepared to pay it if you want to buy what you need/want. My question to you is are you willing to pay market prices for clean diesel since it is a more efficient fuel and forego the advantage of a subsidy that you can not justifiably claim to be deserving of?

That single controversial point that you chose not to respond to covers the essence of the problem. However I will respond to your "other" points. If you feel so inclined kindly take the trouble of reading what I have said on the subject on a couple of threads that have addressed the issue. I am aware that political compulsions are going to reign supreme , bad economics and lack of common sense will prevail. It is because of that reason I have said that eventually parity will have to be restored via enhanced taxes on diesel vehicles. This is not the place to discuss economics so I will not go off on that tangent. However allow me to suggest that you should think this through. Where do you think the subsidies hit the most? They hit those the most they are supposed to protect. This is more so in a budget deficit economy such as ours.

I am currently indirectly paying the market price of diesel. The so called subsidy is paid off by the taxes paid by the middle class. So if so many sections of the economy enjoy subsidy, why not me or somebody else in middle class.
Regarding "your working in that part of the economy", I could not understand. I am trying to think of a country, where there is no subsidy, and prices for everything is market driven. unfortunately, I am unable to find any country where such a thing happens.
there are subsidies all over the world, so why get worked up on diesel subsidy.
As for "subsidy benefit for those who do not need it", well I can't think of a single economy of the world, where subsidy is there only for poor, every section of society gets the subsidy. For example, in the west, bankers making huge salaries were subsidized by taxpayers.
So whats so special about diesel subsidy?

Let us agree to disagree.

The issue is not of getting worked up over this. The issue is of belief. Your believing the opposite of what I believe is fine - that is what sparks debates and arguements.

I am a prospective SUV buyer - the reason I joined this forum. So if I do go down that route (seems a little distant for now) - I shall be guilty as everyone else of partaking a subsidy that I am NOT entitled to. So if the government increases the taxes and makes me pay more for the vehicle or asks me to pay more for clean fuel, I am fine with that. This where you and I disagree. I do not believe I am entitled to having my consumption subsidized.

Ah... question of "belief".
Peace then. Belief is something which cannot be argued. For example, I believe, that I am also entitled to subsidy because there are many services like roads, healthcare, electricity, proper living conditions.... which I do not get inspite of paying taxes. So I view this as a refund from the govt.
So its entirely a question of belief :)

What about the people who do not live in your part of the economy? Would the poor and Lower Income Group be able to absorb the immediate price rise just like you or I can?

With all due respect Sir, I would ask you again to read my rebuttal carefully, i did respond to the point that you brought forward.
My debate still remains the same, there is no way of removing the diesel subsidies immediately. I am sure any person would realize that increase in price of fuel would lead to inflation which would hurt the growth of all sectors. Fuel price increase leads to price rise in every sector including basic commodities. The income of the population belonging to Lower Income Group and poor needs to increase before such a drastic step could be taken. If you go through the tabloids today you would see the repo rates being raised by the RBI to curb inflation, which means the increase in interest rates on loans, which means increase in costs of production, which was a result of the increase in prices of fuel and other essential commodities.
And yes I've gone through the previous posts made by you kind Sir, and i never debated with you on the point of raising taxes on diesel vehicles. My only rebuttal was on my point of capitalism that you chose to highlight.

This was the response to the controversial point which you pointed was absent in my post.
Cheers!

I am all for govt. not subsidizing the product. With that said the price could also be determined without speculation. I am not sure how best to do it so don't hold me for that.

On another note, if the prices increase for gas this may indirectly force people to learn some good habits like car pooling :thumbs up

Govt keen to decontrol prices of diesel, LPG, says Pranab - The Economic Times