Just recently the Society of Indian Automobile Manufacturers (SIAM) requested the Indian Government to consider reduction in excise duty on cars. Earlier this year, the Centre increased excise duty on cars, causing further decline in sales. The rising interest rates and increase in car prices have impacted sales of cars adversely. Many have opinionated that the difference between petrol and diesel fuel prices is too much and should be reduced.
Now the Indian Government has shown obedience by hiking diesel fuel price by Rs. 5/- per litre. SIAM has released a statement saying they welcome the Government’s decision to reduce the price difference between diesel and petrol fuel. Sadly there is no foresight into this matter and SIAM’s welcome statement is short lived. Soon the Indian Government will hike petrol fuel prices to the tune of Rs. 4/- which will again reduce the difference between both the fuels.
So what is really happening? When petrol fuel price is hiked, the effect is a slight reduction in petrol vehicle sales. However when diesel fuel prices are hiked, the effect is much bigger. There is very little decrease in diesel car sales as engines in diesel cars are way more advanced than their petrol counterparts. Diesel cars offer much better performance and mileage, which doesn’t decrease the demand of such vehicles. The biggest problem after diesel fuel price hike is borne by the common man. With the commercial segment running on diesel power, cost of everything will soon shoot up (vegetables, fruit, etc).
I don’t favor diesel or petrol fuel, each has its own advantage and disadvantage. But the Government needs to quickly take a stand on fuel pricing strategy. This constant loop of confusion over future fuel pricing and excise duty structure is nothing short of shocking. The Government needs to reduce state level taxes (specially VAT) in order to reduce fiscal deficit caused by subsidizing fuel. But wait, lets not forget our fiscal woes are caused by coal, telecom and airport scams!
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S Pani September 14, 2012 at 7:25 pm
Where did you get this 4rs petrol price increase in the next few days?? I couldn’t find any news stories mentioning something like this.
Whatever the case may be, diesel prices should have been raised. As it is diesel as of now is subsidised by almost 40%, its time prices were increased. And even if petrol prices are increased by 4rs, it would mean the subsidy on diesel came down by about 1rs per litre, as the actual cost of petrol and diesel are largely the same.
Faisal Khan September 14, 2012 at 7:31 pm
S Pani, Rs 4/- price hike on petrol is being considered. It is on the horizon. When it will happen is not confirmed but it is expected in the near future.
S Pani September 14, 2012 at 7:35 pm
Any links to news articles?? Or do you have a source high up in the oil companies or the petroleum ministry??
Faisal Khan September 14, 2012 at 7:43 pm
Nope, no sources here. Petrol is being sold at Rs. 6 less than the market rate and hence a price increase is being considered. An article which talks about the petrol fuel price by Rs. 4 being on the agenda – http://www.hindustantimes.com/business-news/WorldEconomy/Rs-4-petrol-hike-soon-diesel-LPG-may-follow/Article1-924528.aspx
S Pani September 14, 2012 at 8:15 pm
Yes, obviously I found those news articles. All of them are for about 8-10days ago.
But as you have obviously noticed that we have already had a 5rs increase in diesel prices, along with the 6 cylinder limit for subsidised LPG., while no petrol price increase has been announced. Thus there is no longer an expected rise in petrol prices.
What ever be the case, the rise in diesel price is definitely a welcome move, as this is the first significant increase for quite some time now.
Star September 14, 2012 at 10:37 pm
Why you want to increase the price, but better we thoought to decrease the price.. that is the only solution.. Govt. should decrease all taxes at least by 35-50 % which will reduce petrol & diesel price by at least of 10-15 rs.
Anna hazare & other ppl should create a common man’s voice to reach at Govt. , why they creating their own party i dont understand….
God please save us all … this is going to be worse in near future….
Prady September 14, 2012 at 8:51 pm
Hi Fisal,
There no connection between union budget deficiancy and VAT. VAT goes to state govt, runs at a prohibive rate in most of the states (more than on alcohal drinks in some states) And would like to bring to the notice that price of the petrol is not regulated by government. It’s moves freely in accordance with international crude prices. At the same time Diesel and kerosene are regulated by government excluding private players. that’s why diesel at Shell costs upwards Rs. 65 and Pvt Kerosene @Rs. 50. But petrol costs same or similar at pvt and govt. companies. Now it’s high time diesel has to be deregulated so it moves according to international crude prices. Government is making a blunder by subsidising fuel. If it is subsidising, the worthy tax collected by citizens earnings is used for consumption purpose instesd of development purpose. We pay tax for the development of country. We do not to pay taxes to pay somebody’s diesel or petrol bills. Common people should come to real terms instead getting emotional……better we should be good citizens of the country rather politically motivated or self centered sheeps.
S Pani September 14, 2012 at 9:05 pm
I dont think diesel should be deregulated completely and not be subsidised.
Simple reason is diesel has a far higher effect on prices of each and every item in the market, while petrol doesnt. This is because a large percentage of goods are moved via trucks.
Thus if the diesel prices are not subsidised, the cost of diesel in transport is reflected in prices of consumer goods. Thus this cost is now shared by everybody on a rather similar level. Thus a person earning 50,000rs a year and a person earning 5lakh rupees a year will pay largely the same amount in sharing that cost of diesel.
But if diesel is subsidised, the subsidies come out of taxes that are paid by the people. And the richer class of the society contribute a much higher percentage toward govt tax revenue compared to the poorer class.
This in my view is a more fair distribution of wealth and helps in the overall growth of the country. What should not be done is susidise diesel by almost 50% of its price. A more reasonable amount of subsidy should be given out.
Faisal Khan September 14, 2012 at 9:07 pm
Prady, I know there is no connection between budget deficiency. What I meant was the fiscal deficit also includes subsidy on fuel. So if Government removes the subsidy altogether and states decrease VAT by a significant amount (like the Goa government did), then we can have same fuel price without oil companies losing money.
What I feel is that subsidy should be removed completely and state level taxes should be reduced, this will ensure diesel and petrol cost similar to what they do today, without tax payers money going in compensation.
sen September 14, 2012 at 8:51 pm
The last lines.i have no idea why the common man,government and media are still beating around the bush about corruption.do they have no idea none of this need to have happened had the govt just done its job faithfully.i mean just this govt scandal money(so far) is enough to subsidize.forget inflation..billions of rupees.what about previous govt.billions.
theslayer September 14, 2012 at 11:13 pm
fiscal woes Faisal.. fiscal woes… not fiscal vows :)
Ysak September 15, 2012 at 12:11 pm
In News,they say Oil companies r sacrificing huge losses daybyday..i dunno how these Oil companies r able 2 giv salaries 2 their employers.. poor ppl.. seriously.. v need 2 donate some money 4 them.. dnt ask y dnt they sell off their companies bearng this much loss..!!! :-D
Adi September 17, 2012 at 10:23 am
forget petrol cars….no doubt we see 3-4 yr old accords going for as low as 6-7 lakhs…