[Hayek]

Originally Posted by lapis_lazuli

In fact...in EU, the prices of diesel and petrol are almost the same. What I find difficult to comprehend is, the class which actually "splurges" on fuel-bills: would, even a 200INR/liter, be a deterrent, to use lesser of whatever runs theirs? The mango flavoured cattle class, is always calculating how to be even more frugal, no?

Actually it will. The affluent Indian businessman is the most cost conscious of all Indians - look at the diesel petrol mix in luxury brands for example. Also, for several applications of diesel, people make economic trade offs which are affected by prices. For example, when mobile phone companies decide whether or not to replace a DG set on a tower with a solar panel, the price of diesel is an important parameter - so we will see substitution in several applications if prices are increased.

[sgiitk]

I must say we got off lightly with the Rs.2.35 on Petrol. Where are the Rs.5 hike on Diesel and the steep ones on LPG and Kerosene! Now Oily-Moily wants all petrol pumps to be shut between 8:00pm and 8:00am. I guess he may be trying to help Shinde!!

[RSR]

Originally Posted by sgiitk

I must say we got off lightly with the Rs.2.35 on Petrol. Where are the Rs.5 hike on Diesel and the steep ones on LPG and Kerosene

I guess that's reserved for the day after the end of the monsoon session.

Originally Posted by sgiitk

Now Oily-Moily wants all petrol pumps to be shut between 8:00pm and 8:00am.

Oily-Moily wants to apply band-aid on the right hand when the left hand is bleeding profusely!

[ghodlur]

Oily Moily at his antics again. Proposes to allow diesel prices to be hiked by 50 p/litre every week and LPG cylinder prices to be hiked by Rs 50/- every month. He goes ahead and even proposes to allow states to hike the diesel prices by 90p/litre every month or 50p/lt every fortnight. The reason give again is the under recovery. The auto industry which had hopes of seeing some sales increase in the forthcoming festive season will be stopped in the tracks.

http://economictimes.indiatimes.com/...w/22241211.cms

The impending 5/ltr hike in diesel - would it be over and above the recent hike? I guess the stage is set for the UP govt to relinquish its hold on the public in the forthcoming general elections.

[Jignesh]

Hello All,

I feel it is high time fo the government to put its foot down & de-regulate Diesel Prices. We have all time & again read various analysis on how market determined Diesel prices will not impact inflation much.

Kerosene & LPG can be subsidized by the government for sometime in future but there is no economic sense in keeping Diesel prices artificially low in name of common man. This is so because ultimately the subsidy bill is borned by common man himself in form of various taxes.

I somehow fail to understand who is actually getting the benefit of subsidized fuels.

Thanks,

[sgiitk]

@ghodlur; and @jignesh; He is too scared of the farmers, housewives and trackers noise.

Now the noise will be every month and there will be far more days on the markets when they will Tank (Sensex tanks 700+ today!).

Note from Mod : Please refrain from name calling. Thanks

[itwasntme]

Oily & co. are just waiting for those pesky and nosy politicians to leave New Delhi.

As soon as the latter have settled into their first class seats on AI or have heaved themselves into their white Fortuners, Oily will strike with a minimum 5 rupees diesel hike :-)

[sgiitk]

Let us hope he does!

[dreadknight5]

Originally Posted by Jignesh

Hello All,

I feel it is high time fo the government to put its foot down & de-regulate Diesel Prices. We have all time & again read various analysis on how market determined Diesel prices will not impact inflation much.

Kerosene & LPG can be subsidized by the government for sometime in future but there is no economic sense in keeping Diesel prices artificially low in name of common man. This is so because ultimately the subsidy bill is borned by common man himself in form of various taxes.

I somehow fail to understand who is actually getting the benefit of subsidized fuels.

Thanks,

What is your understanding of Fuel SUBSIDY ? Are you insinuating that somehow the government is making a loss by selling Diesel ?

Please check the fuel price breakup thread and you will realize that government's definition of "Subsidy" is making " LESS PROFIT" on the sale of diesel than Petrol. Yes , you read it right. The government does make a profit of about INR 10 or so per litre of Diesel and 30 something on Petrol.

Making Diesel costlier will not necessarily make Petrol any cheaper. You are basically allowing the government to eat more of our hard earned money.

What will however happen is that increase of Diesel cost will spiral cost of transportation, Food and other common man needs.

[ramzsys]

Originally Posted by itwasntme

Oily & co. are just waiting for those pesky and nosy politicians to leave New Delhi.

Very likely; read in some business news channel that crude oil buffer stocks are dwindling. The (extended) monsoon session ends on friday(6th).

[sgiitk]

Now he denies having ever mooted the 8-8 curfew. Is anything sacrosanct in India - even parliament records are tampered with!

[girimajiananth]

Originally Posted by Jignesh

Hello All,

I feel it is high time fo the government to put its foot down & de-regulate Diesel Prices. We have all time & again read various analysis on how market determined Diesel prices will not impact inflation much.

I somehow fail to understand who is actually getting the benefit of subsidized fuels.
Thanks,

Ahem , let the government put the same foot down and stop corruption. . Deregulate diesel prices and see what happens to the price of vegetables , milk , clothes , bricks , ply wood , your child's school van fee , train fares , stationary , electronics , ... the list goes on . Do you now realize who should get the benefit of subsidized fuel ?

[sarthakgupta]

Originally Posted by dreadknight5

Please check the fuel price breakup thread and you will realize that government's definition of "Subsidy" is making " LESS PROFIT" on the sale of diesel than Petrol. Yes , you read it right. The government does make a profit of about INR 10 or so per litre of Diesel and 30 something on Petrol.

Actually, if you see the breakup, there actually is subsidy on cost price of diesel along with lower taxes. Roughly the breakup is as follows:

Petrol:
Cost Price: Rs 47.20
Central Excise : Rs 9.48
State VAT : Rs. 12.35
Total : Rs. 74.10 (includes dealer commission et al.)

Diesel:
Cost Price: Rs 51.00 (cost price of diesel is more than petrol)
Subsidy: Rs. 10.22
Central Excise : Rs 3.56
State VAT : Rs. 5.96
Total : Rs. 51.40 (includes dealer commission et al.)

Source: From IOCL website
Diesel breakup : Price Build up Sensitive Products.pdf
Petrol Breakup : Price_buildup_of_MS.pdf

The inflation problem is due to the fact that we are borrowing money to pay for the diesel and other petro products subsidy (Think of a situation where you are paying your monthly bills using loaned money). When govt. itself takes such huge amount of money from the market to pay for unproductive subsidies, it leaves lesser money in market (in form of increased cost of capital - i.e. interest that we pay for money that we borrow gets increased) for private players (for their investment needs) and also lesser money for govt to spent productively, leading to higher costs for goods and services coming from private companies (fueling inflation) and lower investments from Govt. (lowering growth). This leads to "stagflation".

Also lower availability of money in Indian market (i.e. higher interest costs) makes private companies to borrow from overseas market. These loans are dollar denominated. And when rupee depreciates (due to variety of economic factors apart from unabridged subsidy spending), it makes these loans costlier leading further loss of investments and growth as now most of the revenue that these private players generate goes towards servicing these loans instead of further investments.

[sgiitk]

Originally Posted by girimajiananth

. Deregulate diesel prices and see what happens to the price of vegetables , milk , clothes , bricks , ply wood , your child's school van fee , train fares , stationary , electronics , ... the list goes on . Do you now realize who should get the benefit of subsidized fuel ?

Do not regulate inflation and see,all the ones you mention will go up, and the only thing which will go down is the RUPEE, and our savings. The worst hurt will be the retirees whose nest eggs will 'vanish'.

[rajshenoy]

Originally Posted by sgiitk

Do not regulate inflation and see,all the ones you mention will go up, and the only thing which will go down is the RUPEE, and our savings. The worst hurt will be the retirees whose nest eggs will 'vanish'.

So true, irrespective of diesel prices going up or down, our Inflation was always up there. All the stuff he is mentioning become expensive and will continue to become expensive even if diesel price gets reduced by 10 rs.