re: Rationalising diesel prices*Update: 50p rise/month announced* Quote:
Originally Posted by asr245 What other source are you talking about? A private diesel vehicle uses subsidized fuel and that subsidy is what should be recovered through a possible one time tax. It's not the best solution but it's the most practical one (dual pricing won't work, complete de-regulation will cause inflation to spiral out of control). |
Its not the most practical solution because you are not addressing the root cause of the problem : Diesel subsidy. Taxing vehicles for one time will mean the government has signalled its intention to continue subsidies indefinitely (because they would be taxing car owners harshly one time and thus they will be 'entitled' to enjoy subsidised fuel for life), which is not at all a practical solution - Over a long term, the most economically viable solution is to abolish subsidies as well as taxes on diesel to bring the prices down to somewhat sane levels. I dont understand the dual policy of taxing diesel and then subsidizing it. I know you think de-regulation will cause inflation to spiral out of control, but then the money used for subsidy can be used in a lot of other purposes which will reduce the dependence on diesel in the first place i.e. address the root cause (please see my post on page 4) Quote:
Originally Posted by asr245 First a question - I know pollution is bad for us but not sure how it's bad for economy? Can you explain? |
Pollution has many economic costs one of them is health bills (It is estimated that in California alone $ 25 Billion a year is spent on health problems that are caused by pollution). I dont want to go into detail on this, just do a simple google search you'll get your answers. Quote:
Originally Posted by asr245 Now some facts -
- Yes modern diesel engines are at par with petrol as far as pollution is concerned and better if CO2 is concerned. BUT that has got a lot to do with the quality of fuel. Diesel in India has very high sulphur content as compared to western countries. According to TOI, BS4 diesel has 50ppm of sulphur compared 15ppm in western countries. And this is with BS4 quality fuel. BS3 is higher. Petrol has no such problems though it does produce CO2 (which in itself isn't harmful but causes global warming). |
Not a valid argument as the diesel buyer does not have control over the quality - and neither does the petrol buyer for that matter. We really shouldnt go into stuff like Sulphur content or for that matter petrol/diesel adulteration as that is something none of us can determine here. Quote:
Originally Posted by asr245 - Diesel when it goes inside private cars does rob the economy. It gets emotional when one realizes that it's the tax we are paying which actually partially funds the fuel of a private diesel vehicle owner. Not only that but it's also funding fuel for power backup DG's in affluent societies, cell phone towers of our mobile operators and fuel for those cabs running around for private profit making companies. That's not what I am paying taxes for! |
Agreed. There is no debate about this. Thus its better to abolish diesel subsidies completely. Quote:
Originally Posted by asr245 - Not a fact but general observation - private diesel vehicle owners generally seem to have more tendency to drive just for the heck of it as they have a diesel vehicle. To clarify it, if one goes for a drive in a diesel vehicle but wouldn't if it was a petrol, I consider it a "just for the heck of it" drive. There goes the theory of reduced oil import bills.
Sure, LPG/kerosene should be considered too but let's just start with the "luxury" segment first. |
This is pure demand / supply economics at work. If petrol costed Rs 30 a litre the opposite would have happened. Do you think a person who is able to afford a diesel car + team Bhpians proposed one time tax will not use his car as much ? Think again ! The fact that he / she did shell out even more money for a diesel than before will perhaps make him use the car even more, which once again, let me remind you is the not the objective of these measures in the first place : The objective of any such measure is to reduce the consumption of diesel and still ensure that the automotive sector is not affected adversely. Quote:
Originally Posted by asr245 I actually don't know one would tax existing private diesel owners so didn't answer that . Maybe there could be law to make all existing owners to pay a tax and policing of that could happen at petrol pumps. |
This is not practical to implement at all. The word "policing" and honesty dont quite go hand in hand in India.
Edited to Add an OT point : Lets consider this case. Even if diesel subsidies are completely eliminated, we'll see market forces at work which will reduce the cost of diesel cars significantly (At the moment this market is willing to pay a premium on diesel powered vehicles due to the subsidy), which will bring diesel cars to competitive levels vis-a-vis its petrol rivals, with perhaps a premium of Rs 20,000 - Rs 30,000 considering the higher input costs for a diesel. It still is economically more viable to run a diesel car considering their higher fuel efficiency. Unsubsidised diesel costs something like Rs 57 per litre, compared to unsubsidised petrol which costs around Rs 71 per litre (in Pune). A diesel still gives anywhere between 20 to a whopping 50% more fuel efficiency over petrol. So, which one is more economy friendly again ?
Last edited by PuntoMania : 23rd June 2011 at 19:51.
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