[azeemhafiz]

An interesting thread on petrol prices, It is quite hard to justify the prices that we pay on petrol and diesel when compared to the rest of the world.

Doing away immediately with the taxes will cause for huge unplanned fiscal deficit (amounting to sums that could get us into brink of a huge depression). In my opinion these reforms have to be in a structured and a planned way. For example the consumption of fuel increases year over year, have the taxes planned as per forecast of fuel consumption for a year Gradually we can reduce the taxes to normal and acceptable rates. So higher the consumption lower the taxes.
To make up for the lost revenue, we would need to plan heavily on regulations, like increase fines for heavy polluting vehicles to a high amount for example, and have a different body of government in PPP model to regulate. This arm could also fund for infrastructure development for the government.

In Karnataka, with infrastructure that could give cave-man a sense of pride for his roads, the sense and logic of taxes get thrown right out of the window. In Bangalore we pay additional 1re per liter towards taxes for infrastructure a smart move for the government considering the literal sense of development could also involve digging up the road and purposely make it non drivable.

One of the most aggravation is filling petrol in your hatchback and watch the rich boys fill up diesel in their Mercs and BMW's for a subsidized rate. Agreed that Diesel is the fuel for farmers and needs to be used extensively for transportation.

Paying a premium for driving a petrol car, another premium for driving on bad roads gives me a sense of extortion. Can we sue the government?

[gostel]

Government deficit and macro economics! Do such things work in our country? We are paid in rupees not dollars (ask any IT engineer) so how does macro-economics affect us? We are a banana republic (excuse me for saying that) and we work only with micro-economics. Our politicians believe in rob-and-run and make-hay-while-it-shines.

The fuel bill does not really pinch the just very few car owners; but goes to aggravate the prices of all commodities across the board. I know only one economics: if our poor masses become more poor then our country is pushed back economically another ten years, perhaps. There will be no long run left after that. The fuel price rise was thwarted to arrest the general prices, I think.

There is another basic rule of macro economics that I overheard somewhere: "If one man is becoming richer then another man is becoming poorer." We should therefore never think that our tax payments are subsidizing the poor. Cheers.

[wildsdi5530]

Actually Gostel, The taxes are pushing the middle classes to poor man's land.
'There is another basic rule of macro economics that I overheard somewhere: "If one man is becoming richer then another man is becoming poorer." ' is a rule of microeconomics. In Macroeconomics, if a man becomes richer, he helps everyone around him become richer.

[tajender]

Originally Posted by xingamazon

and if a responsible person is to take care of it

If there is a responsible person who takes care of the revenue and ensures that it is utilized for the benefit of the public and not looses its worth while sitting in Swiss Bank, then I would say there is no problems paying these taxes. However, do we consider these handful of people sitting in parliament responsible? Come on man, they are the ones for whom parliamentary behaviour means throwing chappals at each other and beating fellow parliamentarians with rods and hurling chairs at each other while attending sessions in parliament.

[adg_andy]

Originally Posted by xingamazon

There are many reaons, one main reason I see this is because the taxes are part of what government considers as revenue.

When one makes a revenue planning one cant make it a variable amount. Moreover to increase/ reduce the taxes on fuel is not simple task. There is lot of red tapism approval and the seller related chagnes that one has to go thro in case this has to be put in place.

I am absolutely OK with the revenue stuff, but why dont they go about it like the Income Tax? Increase the user base The govt. should subsidise less or give out cash subsidy(or whatever). If the price of fuel comes down, the usage will be more(imagine the number of people buying cars when the rate goes down to Rs 30/litre). the sheer volume will drive revenues, and I am not just talking about personal vehicles; commercial vehicles too, will ply more when short distance movement of goods become cheaper than rail.
My two cents.

regards,
adg_andy.

[Daewood]

Originally Posted by adg_andy

If the price of fuel comes down, the usage will be more(imagine the number of people buying cars when the rate goes down to Rs 30/litre). the sheer volume will drive revenues,

For this principle to succeed you need a giant leap in infrastructure(roads, bridges, parking spaces,etc).
An estimate by planning commision to upgrade India's infrastructure to
support the growth rate of 8%, needs an investment of more than 700billion dollars!!! Where are we going to get this money.

And if we depend too much on oil we might have to end up invading a few oil rich countries too. are we that strong militarily?

[xingamazon]

Originally Posted by azeemhafiz

One of the most aggravation is filling petrol in your hatchback and watch the rich boys fill up diesel in their Mercs and BMW's for a subsidized rate. Agreed that Diesel is the fuel for farmers and needs to be used extensively for transportation.

Azeem, a point very well put across. I have also always had the same feeling, This is against the rule of sort.
The rich guy pays less for the fuel bill but a not so rich person pays more for fuel bill.

Hightime govt plans to charge the deisel cars with a variable rate of fiel prices. But this might not go well with those who have paid premium price for thier diesel cars.

But there ought to be a sort of cut somewhere. Its so complex a situation.
The

[Daewood]

Originally Posted by xingamazon

Hightime govt plans to charge the deisel cars with a variable rate of fiel prices. But this might not go well with those who have paid premium price for thier diesel cars.

But there ought to be a sort of cut somewhere. Its so complex a situation.
The

it's actually not that complex. The kirti parekh report has a solution.
Slap a Rs.80,000 fee on all private vehicles which have a diesel engine.
Manufacturers are already charging around 60,000 premium on a diesel engine. which means the diesel car consumer will be charged just Rs.20,000 extra than today. it seems fair.

[smashnerd]

Honestly, since this debate is about macro vs. micro, I will say that if we look at the future (I mean decades not months) and the impact the fuel prices have on it; we shall see that overall it has a good effect. It helps to curb the growth in the number of private vehicles; especially cars being used to transport a person to work and back. If you go out at rush hour and just count the number of employees commuting to work alone in their car, you shall understand what I'm talking about. It's kind of a "Vicious cycle" thing.

The downside of personal transportation has surfaced quite clearly and governments are trying their level best to curb growth in the same area. And here we are pleading to lower fuel prices. Are you people so narrow-visioned that you put your own happiness above that of the future generation? Plus, think what our roads will end up like if ~400 million vehicles start plying on it. Are we still aspiring to follow in the failed footsteps of the US or are gonna rise up to the challenge and suppress our individual ego's needs and work for communal benefit?

I'm not like talking about curbing freedom of speech/religion or something. Vehicles are a product of our imagination and are tremendously beneficial when used to their maximum potential. We sure are smart enough to use them without putting ourselves at risk in the long run.

[sriku]

A rediff article on the taxes levied on petrol with a graphic that makes it easy to read is here.

Whether the heavy taxation on fuel is sound policy or not, I am not qualified to judge, however, it is increasingly evident that such taxation levels on such a crucial element of our daily lives seems to defy logic. For instance, how many other products or services do we use on a daily basis that match the same levels of tax that petrol enjoys?
1. Road tolls: imagine paying 60 INR instead of 30 INR, when you clearly know that the contractor tasked with road work earns only 30 INR, and the rest goes to GOI. Will you use these roads daily?
2. Electricity: If each unit is priced at 9 INR as against 4.5 INR, will you continue to run A/C's all night long, or enjoy that long luxurious hot shower every morning?

I can go on(and become even more boring), but I believe the point is made. It is not justifiable to heavily tax any commodity that is so crucial to every man's daily life. A heavy 150% import duty on SBK's and imported cars may not affect every man every day. However the ~50% per liter of petrol tax that we pay affects every single man, in a multitude of ways.

I am no economist, nor do I have any statistics and figures that can aid my argument. However, I am a member of this country's Middle Class. My parents have struggled to bring our standard of living to a level that allows us to consider owning a car, a house or two and some other luxuries that their parents did not ever seriously consider owning. It is then safe to presume that I will now be able to afford a car, aspire and buy one, then drive it to work, and everywhere else(unless it gets stolen). The point I am trying to make is this, our economy is driven by the Middle Class, or so I have heard. The Indian Middle class has been the primary target audience for every major manufacturer of automobiles here. Pricing these cars within our reach, then pricing petrol out of our reach seems almost criminally sadistic. Knowing that half of what we shell out for fuel is its tax component decided by our Govt, makes it all the more unbearable.

Cheers,
Sriku

[xingamazon]

I am still not sure why is govt pushing for alternative fuels esp. Biofuels,
Brazil has a vast extent of acceptability of Ethanol fuels. There are cars which can run with almost 85% fuel being ethanol and only 15% requiring to be petrol.

That would surely be a heavy saver for the govt excequer. Not sure why govt doesnt push for thier cause.

[smashnerd]

Originally Posted by xingamazon

I am still not sure why is govt pushing for alternative fuels esp. Biofuels,
Brazil has a vast extent of acceptability of Ethanol fuels. There are cars which can run with almost 85% fuel being ethanol and only 15% requiring to be petrol.

That would surely be a heavy saver for the govt excequer. Not sure why govt doesnt push for thier cause.

How due you propose to grow feedstocks from which biofuel is derived? Remember we have to first feed the billion plus of our fellow humans and citizens.

Prevention is better than cure.

[ajman28]

Originally Posted by adg_andy

I am absolutely OK with the revenue stuff, but why dont they go about it like the Income Tax? Increase the user base The govt. should subsidise less or give out cash subsidy(or whatever). If the price of fuel comes down, the usage will be more(imagine the number of people buying cars when the rate goes down to Rs 30/litre). the sheer volume will drive revenues, and I am not just talking about personal vehicles; commercial vehicles too, will ply more when short distance movement of goods become cheaper than rail.
My two cents.

regards,
adg_andy.

We are witnessing a tremendous growth in automobile industry. Oil companies too are doubling their outputs in the country to meet the requirement. The volume is already available. So I dont see any point in decreasing the price to increase volume still further. We might actually end up in a state of fuel shortage then.

Originally Posted by xingamazon

Azeem, a point very well put across. I have also always had the same feeling, This is against the rule of sort.
The rich guy pays less for the fuel bill but a not so rich person pays more for fuel bill.

Hightime govt plans to charge the deisel cars with a variable rate of fiel prices. But this might not go well with those who have paid premium price for thier diesel cars.

But there ought to be a sort of cut somewhere. Its so complex a situation.
The

The number of high end diesel cars on the road is less than 1%. And if you further consider the actual mileage clocked by these guys compared to the total mileage clocked across the country then am sure it will be in the nano-scale . So, what difference will it make?

Further, the cars with bigger engines are already taxed higher and if it is imported then taxation is 150% extra. So they are already paying a huge amount for using the subsidised diesel.

We should encourage more of diesel vehicles since diesel is a cleaner fuel when compared to petrol.

The taxation levels need to be high for fuel since this is one of the highest and easiesit revenue generators for the government (another one being alcohol ). The money is required for further development activities (construction of new roads and bridges are not cheap).

Another thought which popped up is "why not make the price of fuel astronomical?". In this manner we will all think atleast 3 times before going to the petrol station and start thinking of alternative methods to reach our destination. We could actually witness more hybrid/electric cars on the road then!!

"Necessity is the mother of all invention" and once fuel becomes out of reach, we will invest more time and effort into finding out alternate solutions. Someone might actually invent a very clean fuel which costs nothing!! Wouldnt that be great?

[wildsdi5530]

Kudos to Ajman. Perhaps we can suggest the solution to hunger. Make food prices astronomical and we can go to eating alternate foods like grass or soil. We could actually witness more goats/cows working in companies then.
But seriously, The truth is that the govt. is onto a good thing and doesn't want to let go. Consider this: the rumor mills have been contemplating at a huge price rise in petrol and Diesel prices. And now diesel is 22 Ps. higher. So everyone heaves a huge sigh of relef. This trend continues ad infinatum. Perhaps the govt. employs people to spread these false rumors. The 22ps. will still raise your costs by 0.08%. This fact is absorbed by 'the benovalent govt. which didn't raise price of diesel by Rs. 2 as we feared' mentality

[tj123]

Our current or expanded infrastructure just cannot cope up with the increasing vehicular population. We should not make the same mistake which the West has already made. In US I daily see horrible traffic Jams despite having 8-12 lanes on either side of the road. This does not mean we should not widen roads , but its not a remeady either .

We should look at efficient mass rapid transportation system well supported by city buses.

In my opinion pricing should be market driven and unrealistic subsidy on Diesel , Kerosene & LPG should be removed as lot of the benefits of these subsidy is not reaching the target population.

A higher cost of fuel will force people to demand better transportation system , better fuel efficiency and focus on alternate fuel technologies to reduce dependence on oil.

By keeping prices artificially in control harm the economy in long-run.