[jagzrk]

So basically fuel price de-regulation is only for governments not for people. The way I see it, more fuel gets cheaper, more they will tax it and fuel prices remain same. And when it gets higher, they will increase prices saying its de-regulated.

Also, considering the recent steep drop from 84$ to 77$ in crude prices which is nearly 10% it was expected that fuel rates also drop in the same percentage. Though I was one of the gullible few who fell for acche din, now I am looking for something to vent my rage that I actually fell for it. On a side-note, I am pretty sure AccheDin have actually come for a select few.

[civic-sense]

Originally Posted by jagzrk

On a side-note, I am pretty sure AccheDin have actually come for a select few.

Coming back to the discussion, I wonder how the govt was able to make the OMCs absorb the 1.5 rupee hike, if fuel prices are now deregulated. Here it seems, the govt was able to make the OMCs drop prices in tune with the tax hike.

Something fishy, isn't it? When would the govt truly deregulate fuel prices?

[Fuldagap]

Although I don't think the present govt has done so far/will ever do even remotely what it had promised or what the voters/believers had imagined, I do think the tax hike is a thought after move.

The recent massive fall in international Brent Crude has allowed OMCs to be able to sell at lower prices. True. Raising the tax at such point not only allows govt to increase its income but also check huge imports.

When prices go down consumption generally increases. the govt doesn't step in now, when the prices are invariably going down everywhere, the resultant could be worse than imagined.

The unofficial price war that is going on between Saudi Arabia and the USA due to high pumping of shale oil by the latter has become an elephant in the room, leading to worldwide lowering of prices.

Oil price wars have the tendency to be unpredictable, often ending in trouble for huge importers like India if not handled properly. It is quite understandable that taxing not only means income for the govt but also is a tool to regulate demand and supply and keep inadvertent use of oil by individuals/organisations in check.

It's like setting up ones car right with suspension, camber, BHP, torque and what not for the desired result on a certain track. Optimum settings, optimum results.

Shale oil reserves have the potential to turn around the fortunes of various countries including India. According to one estimate, Pakistan has more shale reserves than even Canada. And India has hopefully much bigger reserves than Pakistan. But the technology barrier has been a hindrance to both, lesser to India though.

Buoyed by volatile price reduction, things could go wrong if the govt(technically the bureaucrats) doesnt step in checking the reduction in prices.

Deregulating the prices 'completely' and giving the OMCs the reins could even end up in cartel formations, who knows.

[hellmet]

I'm personally happy that the prices have been slightly stabilized by increase in taxes. When prices go down, none of the people who increased fares or prices ever bring their rates down - autorickshaws, bus operators, plumbers, vegetable vendors, FMCG manufacturers, etc.

If the rates for fuel goes down and starts going back up, all the buffoons mentioned above will again begin to increase rates citing higher fuel prices.

Also, if India can reduce CAD and get rid of all the debt by raising taxes on fuel, then I'm in. As it is, I've got used to 75Rs. petrol anyway!

[babu.sundaram]

+1 to the arguments in favor of stabilizing the fuel prices.

As we know, oil contributes to huge chunk of our imports. Letting price go down could impact our consumption patterns in long term as well (less mileage vehicles sales increase or more people upgrading to bigger engines for example). The key to managing this would be to not let loose the controls. Not to mention, high fuel prices would also force usage of more efficient vehicles and hence, cleaner environment!

I would even go to the extent of increasing taxes to keep prices high at 100$ levels, so India puts in part in increasing the supply-demand gap! (India is one of big importers in the world!).

PS: All this would hurt at the pump, but it could improve our other prospects (like better deficits, etc)..

[drmohitg]

Originally Posted by hellmet

If the rates for fuel goes down and starts going back up, all the buffoons mentioned above will again begin to increase rates citing higher fuel prices.

And won't these so called buffoons still going to increase the rates when prices go up now? How does increasing the taxes anything to do with this? Really didn't understand the logic behind this comment.

Originally Posted by babu.sundaram

As we know, oil contributes to huge chunk of our imports. Letting price go down could impact our consumption patterns in long term as well (less mileage vehicles sales increase or more people upgrading to bigger engines for example). The key to managing this would be to not let loose the controls.

When fuel was dirt cheap in comparison to today's prices, even then We Indians always opted for VFM cars. Are you suggesting that because of this temporary price falls, people will start upgrading to bigger engine cars? And anyways which car in our market is a true fuel guzzler? Almost all cars upto the D segment these days give a very healthy FE. Infact the trend is opposite with many car makers bringing in lower capacity engines with better technology that provides a higher FE.

[babu.sundaram]

Originally Posted by drmohitg

...When fuel was dirt cheap in comparison to today's prices, even then We Indians always opted for VFM cars. Are you suggesting that because of this temporary price falls, people will start upgrading to bigger engine cars? And anyways which car in our market is a true fuel guzzler? Almost all cars upto the D segment these days give a very healthy FE. Infact the trend is opposite with many car makers bringing in lower capacity engines with better technology that provides a higher FE.

First, when the fuel price was dirt cheap, so were the other prices, say compared to wheat, rice.. If adjusted for inflation, today's fuel may actually be cheaper than what it was 10 years ago (some economist help please :-) ).
That said, we dont know if the price shallow is temporary or long term. If we dont know if it is not short term, it is better to treat as long term? What if we let fuel price down and it consumption climbs up and price stays that way for long?

Whether a vehicle is fuel guzzler or not, is relative. Purely from a fuel consumption viewpoint, even moving someone from nano to a bike OR Santro/WagonR to 800/Nano would also save fuel, to that extent. From a Governance viewpoint, even that seemingly lesser move would do save CAD when it happens on larger scale.

[anuragn]

Originally Posted by babu.sundaram

First, when the fuel price was dirt cheap, so were the other prices, say compared to wheat, rice.. If adjusted for inflation, today's fuel may actually be cheaper than what it was 10 years ago (some economist help please :-) ).

Agree to this.
Cost of Petrol at Rs 70/liter today (in Mumbai) would be same as Rs.32 ten years ago assuming 8% inflation rate.
A google search yields actual price in Nov2004 to be above Rs.40 !
So, actually petrol is cheaper today, if we assume a constant inflation of 8%.

[saurabhkum]

I have no issues if Govt decided to increase the tax to fill their kitty instead of passing the benefit to the consumers, but at the same time I've 3 points to be made.
1. Does this means that fuel prices are not de-regulated ? Or they are only de-regulated when crude price increases?
2. Will the Govt cut taxes later on if the Crude prices increases?
3. From 114$ level to 78$ is a fall of 30% in prices even if I offset the Rupee vs Dollar deviation of 5% still prices should have been down by 25% which means petrol in Mumbai should be at 60 per liter, why are they silent on this.

[anuragn]

There is a difference between regulation and increasing the tax rate, please don't confuse between the two.
In the regulated price regime, govt oil cos were selling at price lower than sum of cost+taxes, which is why private companies were unable to sustain in domestic market.
While this increase in excise duty is for all oil companies.

[saurabhkum]

Originally Posted by anuragn

There is a difference between regulation and increasing the tax rate, please don't confuse between the two.
In the regulated price regime, govt oil cos were selling at price lower than sum of cost+taxes, which is why private companies were unable to sustain in domestic market.
While this increase in excise duty is for all oil companies.

Going by this logic they should have announced that fuel prices have been cut by 1.5 Rs but taxes have been increased to that effect. Also even if you add 1.5 Rs tax the cut should have been atleast 5% or almost 3-3.5 Rs . Still the net effect should have been a drop of 1.5-2 Rs per liter which they have not done.

[hellmet]

Originally Posted by drmohitg

And won't these so called buffoons still going to increase the rates when prices go up now? How does increasing the taxes anything to do with this?

The govt kept the fuel prices unchanged and instead increased taxes - so what you pay at the pump remained the same. If not for the tax increase, we'd be paying lesser for fuel already.

[anuragn]

Originally Posted by hellmet

The govt kept the fuel prices unchanged and instead increased taxes - so what you pay at the pump remained the same. If not for the tax increase, we'd be paying lesser for fuel already.

The crude oil price we all are quoting are for the benchmark oil. We need to consider the weighted average price of actual basket of crude that the Indian refiners are consuming. Adding to the complexity is the future trading and hedging that all oil companies do.
So it is not as simple as applying the same percent drop in benchmark prices to the finished products being sold in the Indian market.

[ckranjan]

Originally Posted by anuragn

The crude oil price we all are quoting are for the benchmark oil. We need to consider the weighted average price of actual basket of crude that the Indian refiners are consuming. Adding to the complexity is the future trading and hedging that all oil companies do.
So it is not as simple as applying the same percent drop in benchmark prices to the finished products being sold in the Indian market.

If that holds true, then how come the price of fuels are reviewed every 15 days? On what basis? The weighted average price would not come down in 15 days or it will?

I don't know but everything is not alright. Something is missing which the govt. and OMCs are keeping from public.

One thing is clear fuel pricing in India is not transparent. It has become a tool for the govt. to hide it's inefficiencies rather than a tool to bring development.

[drmohitg]

Originally Posted by hellmet

The govt kept the fuel prices unchanged and instead increased taxes - so what you pay at the pump remained the same. If not for the tax increase, we'd be paying lesser for fuel already.

No what I am saying is that once the crude starts climbing up again, the government is not going to redcue the taxes that time right. And the so called buffoons will again ask for increase in prices for there services. So it will be a double blow to us.