[lurker]

Originally Posted by Hayek

The lack of economic rationality shown on this thread is depressing. Even when the Indian economy has become the sick man of the world thanks to the borrow, subsidise and spend policies followed for the last 9 years, people are cribbing about the price hikes on petrol instead of about the irrational and unaffordable subsidies on other fuels. Petrol is NOT overtaxed in India, Indian taxes are fairly moderate. Yes, some states like MH and KA over tax petrol. Diesel is undertaxed in India - there is no rationale for taxing it less than petrol. And the government involvement in setting prices of fuels is insane and also represents a criminal violation of corporate governance norms- they should set the tax rate, privatise some of the OMCs and get out of the fuel business.

We are running out of time - if India does not change drastically, we are going bankrupt in a short while. Rs. 1000 to the USD anybody?

So what should be a fair retail price for petrol, in your opinion ?

100 110 150 200 or 1000

[gsurya]

Originally Posted by lurker

So what should be a fair retail price for petrol, in your opinion ?

100 110 150 200 or 1000

Petrol is already at the 'fair' retail price. Its decontrolled. Its Diesel that is subsidized right now. If US/EU/China all start growing fast again, we will see crude getting costlier. But then our GDP growth will get back to 8/9% too. So is all interdependent.

[lapis_lazuli]

Originally Posted by lurker

100 110 150 200 or 1000

I think what hayek is trying to say is not about the numbers, (which by the way could be anything, depending on how the country performs as a whole), but more about the illogical difference in the pricing of petrol and diesel. As per my own observation in at least 6 European countries, the price for both are more or less, same.

No developed nation is cheap in retail or commodities, or can afford to be cheap, subsidize the needy, maintain and provide social security and yet boast high single or double digit growth: is just not possible. And there is no such thing as a MRP printed on goods. The demand and the overheads, determine the customer PRICE, the actual COST being agreed by the manufacturer and the retailer, and it changes periodically on the labels that we get to see! The GREED part, is minimal. Do we call this "decontrol" ? IMHO, no, just fair business sense!

Here, I can ask the manufacturer to print ANYTHING I wish, as MRP as long as I buy in bulk! Stationery goods, local bakery produce, a pack of mushrooms, spurious car parts, cosmetics....every one of us should know the mark-up and the margin that the "MRP" (a controlled price, in a sense, farce actually) hides!

When it comes to implementing tough decisions, keeping the distant future in mind, our leaders and minions suffer from selective and voluntary paralysis of the brains and other organs. It's like, "let go of today, for tomorrow, I have enough cash stashed away in the banks of nowhere".

The sooner the unnecessary subsidies vanish, the better it is. My domestic help, works more, with no signs of failing health as a result, to make up for inflation or price hikes or rise in fuel prices. Her husband optimizes the routes for his auto rickshaw. I eat out less, and I gain lesser calories and hence lower med bills in the long run. This in my very limited knowledge, is good for the nation: more work per person, spending on needs, and lesser on wants, till the nation builds up. Then we become consumers again , till the next debt crisis.

[navrddy]

Originally Posted by lapis_lazuli

I think what hayek is trying to say is not about the numbers, (which by the way could be anything, depending on how the country performs as a whole), but more about the illogical difference in the pricing of petrol and diesel. As per my own observation in at least 6 European countries, the price for both are more or less, same.

==========

The sooner the unnecessary subsidies vanish, the better it is. My domestic help, works more, with no signs of failing health as a result, to make up for inflation or price hikes or rise in fuel prices. Her husband optimizes the routes for his auto rickshaw. I eat out less, and I gain lesser calories and hence lower med bills in the long run. This in my very limited knowledge, is good for the nation: more work per person, spending on needs, and lesser on wants, till the nation builds up. Then we become consumers again , till the next debt crisis.

Cycle continues; except that we can decide to make it run slower.

[Hayek]

Originally Posted by lurker

So what should be a fair retail price for petrol, in your opinion ?

100 110 150 200 or 1000

There is no one fair price for petrol. The government should set taxes, and let a competitive market determine the price. This is of course not possible when the government owned OMCs monopolise fuel distribution. So that needs to be freed up, and other retailers should be allowed to distribute fuel products. E.G., in the US, Wal-mart is amongst the biggest fuel retailers, so why can't Big Bazaar or Hypercity distribute petrol?

The price would fluctuate everyday, sometimes even multiple times a day and vary between different pumps (for example, prices in pumps that are in the direction of traffic flow in the morning would be higher than those across the road). For all the talk that petrol is decontrolled, when the oil marketing companies consult with the government before setting prices, and then set identical prices, that is not a free market. Logically, the price of petrol in pumps that are on cheaper real estate and with higher throughput (such as those on highways) would be less than that on low volume rural pumps, or on pumps sitting on expensive South Bombay or New Delhi real estate. The base price in cities that are closer to ports or refineries would be less than that inland to reflect transport costs. With a free market system, national average fuel prices would fall as the marketing margin gets set at an optimum and efficient level, instead of being an arbitrary mark up that a bunch of inefficient monopolists set.

The same applies for diesel, LPG and kerosene. Set taxes and get out. And I do agree that taxes on diesel should be equal to those on petrol - so the diesel price in Bombay should be upwards of Rs. 80 per litre.

[sujithpnair]

May be a naive question: if oil companies are selling fuel at loss, how they are registering profits in BSE/NSE? They offer good dividends too!
Sorry Hayek, I cannot agree fully with you. I think our economy is not as bad as projected. Rather than penalizing the common man, an unbiased initiative from government to find and seize black-money would have been much wiser action. But I agree, who will bell the cat, where unfortunately corrupted community decide our nation’s future!

[Jignesh]

Hello All,

Coming back to the discussion on Fuel prices, while passing by BP Petrol pump yesterday, I saw Petrol prices in Mumbai are currently at Rs. 83.77.

I am not getting into Petrol v/s Diesel argument, but would like to ask one question - Are the petrol prices high due to artificially lower Diesel prices? I mean is Government compensating the Oil Marketing companies for all the loss on sale of Diesel? Or the Oil Marketing companies are recovering a part of the loss on sale of Diesel from Petrol prices?

Frankly speaking the Petrol price of Rs. 84 is grossly unbearable for middle class. Also taking into account the expected LPG price hike in near future & significant hike in Natural Gas (Pipeline Cooking Gas) price from April 2014.

Thanks,

[sgiitk]

Originally Posted by sujithpnair

May be a naive question: if oil companies are selling fuel at loss, how they are registering profits in BSE/NSE? They offer good dividends too!

I think the losses are notional, based on international prices (ie. price parity). Also, I can see that they are doing too well since they did not have the money to modify the refineries, which delayed the BS-IV / BS-III rollout by about three to six months.

[salunkhe.vizz]

Originally Posted by sujithpnair

May be a naive question: if oil companies are selling fuel at loss, how they are registering profits in BSE/NSE? They offer good dividends too!

Originally Posted by sgiitk

I think the losses are notional,

The oil companies inherently make losses, but are compensated by bailout packages given by the government. If you open any oil company's balance sheet, you will see these special entries. Total profits are achieved by two key inputs : a) Government Compensation b) Discounts by upstream companies.

Under-recoveries (which are widely reported in newspapers, on per ltr cost) on the other hand, are notional losses.

[crazyro]

As per latest news report Losses on diesel is at record Rs 14.50 a lt.
The under recovery from diesel currently stands at a whopping 486 cr per day.
Last year the total under recovery was Rs 1,61,029 crore out of which government paid around Rs 1,00,000 crore to the oil companies and the rest was borne by the oil companies.
This year the Government has only budgeted around Rs 65,000 crore for petroleum subsidies.
If diesel prices are not increased immediately the chances of India rating downgrade to junk status is a possibility which will have other adverse effects.

[rock75]

it's all a sham, almost 50% taxes (excise/custom and sales tax) are levied on petrol. In Goa (with nil sales tax) the petrol price is R 62.96 whereas in Punjab it is Rs 83.34 (>30% VAT). Diesel has lower tax rates for obvious reasons.

If the state governments chose to tax petrol sensibly, the price won't be more than Rs 70 even today, but considering many state finances are in the red, they won't bite the bullet.

Petrol price is never an election issue, though it hurts many of us on a day to day basis.

[acroback]

Had there been better transport like Metro from my home to workplace, I would never ply my vehicle on road.
But in Bangalore it is nightmare to use public transport on some long routes, hence the vehicle.

I do not care about Diesel prices, keep it sane with market condition and give me efficient public transport. This is all I want. Oh yes, please do not leave Kerosene untouched, it is very very heavily subsidized.

[AbhishekB86]

You price it so high that austerity measures are in place anyway. You tell me to take one outing less okay but justify the 13 rupee hike in a few months to me. That's 13 bucks per litre of petrol. Is there an alternate? You have an incomplete street to street transport network and then you encourage me to take public transport. So let me walk for 3 kms and then take a bus which is flooded with people with the driver driving like he's on a suicide mission. I risk getting my wallet, phone pick pocketed and women with me harassed. It's a sad state of affairs. I am aware of why there are hikes and what not but as a middle class citizen this is just another vent.

[saket77]

Originally Posted by rock75

Petrol price is never an election issue, though it hurts many of us on a day to day basis.

And it is surprising that how everybody, right from political parties to even the general masses which include us are keeping mum even at these atrocious prices of fuel. For a middle class person, soon driving a car would be history.

[Jignesh]

Originally Posted by saket77

For a middle class person, soon driving a car would be history.

That is exactly what I tried to point out couple of days back.

I would give my own example - I own both a car & bike. Everyday morning I have a choice to either go to office by Car or Bike & 99% of the times it is bike that I chose. Though there are other deciding factors like traffic & travel time but most often fuel cost is the prime consideration.

Even after riding a premium (180 CC Pulsar) Bike, I get mileage of 45 kmpl while in car I get mileage of not more than 12 kmpl in city. Thus the fuel cost per KM is heavy in favor of bike (less Rs. 2) when compared to Car (Rs. 7)

This clearly means that the middle class has no option but to choose economy over safety.

Thanks,