[dinar]

If diesel prices increase than they will be for all the vehicles on the road small as well as big, exception will be for commercial transport and agriculture use only.
As for the subsidiary part ,it is about 12 Rs a liter, so the hike should be 37+12= Rs 49, but if the taxes on this are reduced in the first place the actual price will be not more than RS 30 a liter.We Indian pay Taxes on Taxes, as I found out from my electricity bill higher education cess in charged on bill amount + education cess + service tax.....

[mjothi]

Originally Posted by condor

Taxation based on classification can be skewed. The smaller the car ( hence lower price tag) will sell more. The bigger cars will sell less. Taxing the bigger cars alone may get the govt more revenue per car. Taxing all cars but at significantly smaller levels can get the govt more revenue, but from a wider spread. By not taxing the smaller cars, the govt is missing on a big group. Then again, by not taxing the petrol cars, the govt is missing a bigger chunk of cars that can be taxed.

Any increase in taxes for bigger cars will surely see some drop in their sales. This is where I am looking for support from the manufacturers to put pressure on the govt to not impose so high a tax that sales are affected.

Another factor is that the bigger cars are also where manufacturers get better margins. If sales are affected, there is scope for them to reduce the prices.

But then, this is India. Tax is supposed to be paid on income. If we pay tax on the tax paid, is there anything that will be spared ?

The whole thing reminds of Tennessee Ernie Ford singing Sixteen Tons.
Classic Country, Sixteen Tons - Tennessee Ernie Ford Lyrics

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store

This tax on tax & more taxes makes me wonder if it's the gov't thinks that it is their birth-right to tax citizenss. Or if the citizens owe their soul to the govt !

The smaller car section is one where majority of the vote are present. No one will try to do harm to this. At the same time, putting diesel cess (if done) shows clearly that Govt. dont want private owners to get subsidy, whatever be the revenue from this. In other words they want to discourage the sales of Diesel cars for sure.

[filcord]

I admire the way Condor has hit the right spot. The crux of the matter is pricing as per market price. Any attempt to subsidise or subvert the market will always lead to corruption, imbalances and absurd situations (like the fate of oil companies in India today).
The simple solution is to allow sale at market price. Bite the bullet. It will pain a lot in the short term, and will affect persons who have made their calculations based on an artificially depressed price - but in the long run, it will lead to true economies, prevent wasteful use of the fuel, and serve as greater incentive to improve efficiencies, etc.

[joslicx]

Originally Posted by mjothi

The smaller car section is one where majority of the vote are present. No one will try to do harm to this. At the same time, putting diesel cess (if done) shows clearly that Govt. dont want private owners to get subsidy, whatever be the revenue from this. In other words they want to discourage the sales of Diesel cars for sure.

votes and car owners!!! How many car owners actually go out to vote in India???

I think the govt can very safely increase diesel/petrol prices for car-owners without expecting any kind of repercussions (I mean vote bank loss)! Rich (or rich enough to own a car) people in India hardly ever go out to vote!

[condor]

filcord : Any attempt to subsidise or subvert the market will always lead to corruption, imbalances and absurd situations (like the fate of oil companies in India today)....

- but in the long run, it will lead to true economies, prevent wasteful use of the fuel, and serve as greater incentive to improve efficiencies, etc.

As always, the govt appears to be taking a short-cut, and further complicating matters. Their actions are always re-active in nature. There's always a surcharge or a cess, but they will never rationalise and simplify the tax structure.

If the pricing is rationalised to market price + VAT, the prices may actually end up close to / lower than current rates. May be they are afraid that this will show their collective & cumulative mistakes till date.

[GenuineOptimist]

'The government' that is getting blamed in the thread is actually not one but consists of two entities. Bureaucracy and the Politicians(lawmakers). The former can only write reports and suggest methods and the latter dances to the voters. Since nearly all the voters remain illiterate, no leader can afford to make beneficial-in-the-long-term measures that look bad in the near-term, simply because they can't educate the illiterate masses that this is the right approach.

A literate and educated Indian population will solve most of the ills in this country. But unfortunately I don't think that is going to happen in our lifetimes.

[simplyself]

A good suggestion by a forumer. Why keep on whining that the subsidy on diesel is ruining the companies? Just remove all the subsidies and then rationalize the tax structure? What the government is planning is obscene.

[simplyself]

A major chunk of subsidies go by the way of subsidizing kerosene and LPG. Let those subsidies stand and let the subsidies on diesel and petrol go. Just remove all the subsidies on diesel as well as petrol and then rationalize the tax structure. This way, the OMCs cannot claim "notional losses" as they now do, and as the base taxable amount is increased, so does the actual amount collected as tax increases as a percentage. Now, offset upto certain extent the loss in taxable revnue by taxing the OMCs ala the proposed "windfall profit tax" the govt considered slapping on Reliance just before the trust vote (which lead to Amar Singh and Mukesh Ambani meeting the PM and the allegations, which ofcourse are topic in a different forum).

If wishes were horses.....

[madhav]

Well the dual pricing idea seems ridiculous and almost impossible to implement considering the gamut of issues that already exist and the new ones it will create.

The Govt. can however consider a different approach...
Every automobile user has to renew the insurance every year. The Govt. can easily add a component to the insurance for diesel vehicles. This can be based on some calculation like a "big" diesel car which would consume close to 150-200 ltrs of diesel/month should have paid Rs. 4,400 more without the diesel subsidy. So the along with the annual insurance, you can add a component of Rs. 52,800 (Rs.4,400*12) which can go towards adjusting the subsidy. This is pretty foolproof and cannot create the kinda problems that the dual pricing can open-up! (The example is just to give an idea.. there could be a better formula for the tax)
The Govt. can make a lot money and the diesel car owners have to run a "lot" to actually see an economic gains of diesel.

PS: I own a diesel car and it is really painful to know that I'll have to pay more for the fuel very soon. :(

[vijaycool]

"Heavily Subsidized" is a misnomer. They actually refer to "Not heavily taxed" but they are not selling at loss. One thing i could not able to understand. Increase the fuel price by 10% and reduce the tax by 10% so the govt owned oil companies are not at loss. Also the price is not increased still the income belongs to the govt. Whats the logic behind govt pushing govt company not to sell higher?
If they provide proper power supply then whats the necessity for the IT and other industry need diesel . So indirectly we will be getting more power cuts to promote "heavily taxed" diesel consumption so govt power generation can be relaxed because it does not require to sell Rs 5 per unit for Rs 2

[ibm_jennifer]

calculation like a "big" diesel car which would consume close to 150-200 ltrs of diesel/month

My Safari never used more than 50 litres per month!!!

[condor]

ibm_jennifer : My Safari never used more than 50 litres per month!!!

So your running is not more than 600km a month.

[ibm_jennifer]

So your running is not more than 600km a month.

400km only!!!
..................................

[CBlazer]

Originally Posted by ibm_jennifer

400km only!!!
..................................

Big size/engine does not necessarily mean less fuel efficient. You can find plenty of Octavia 1.9TDI owners out there who have boasted of their car's fuel efficiency for years. Let's say Skoda puts in a 1.9TDI engine into the Fabia - the FE should only be better compared to an Octavia due to the lower weight.

But the govt.'s definition of "small" car is so out-dated, the owner of a 1.9TDI Fabia would have to pay more for his fuel(if the size policy for fuel price comes into effect).

I get an impression that the govt.'s message is - if you have money to buy an expensive car, you should be ready to shell out more for fuel/VAT, etc. The govt. is just taking the easy way out. Why bother about classifying cars based on fuel efficiency, etc.?

My suggestion is to remove subsidy on diesel for any non-agricultural usage - there are plenty of poor farmers who need some cushioning. Either way, any kind of dual pricing will lead to black marketing. It happens with kerosene, it will happen with diesel too.

[mjothi]

Originally Posted by CBlazer

I get an impression that the govt.'s message is - if you have money to buy an expensive car, you should be ready to shell out more for fuel/VAT, etc. The govt. is just taking the easy way out. Why bother about classifying cars based on fuel efficiency, etc.?

100%. What else do you think our neta's are in to?

Wait a minute, isn't all these suggesstions are coming from commission comprising of educated, knowledgeable persons? So, how is it they look at these?