Fuel Subsidies in India

[Godless-Kafir]

The above shows India is Shining!

All these gimmicks are just bandages for a man getting sicker. They need to have curbed corruption and increased electricity production to keep the GDP growth on the uptrend. Lack of power is destroying Indias growth. The GDP growth is directly proportional to the amount of electricity produced.

 

[nrj]

Why India Should Hike Diesel Prices

Fearing a political backlash, the Indian government has postponed the decision to hike the diesel prices for the time being. However, economists feel that it is time the government deregulated the prices of diesel and stopped subsidizing them.

In India, diesel price is highly subsidized and is nearly 40 percent less than petrol price. After the recent price hike, petrol now costs Rs 78.57 per litre in Mumbai while diesel is priced just Rs 45.99 per litre in the city.

Unlike petrol, which is regarded as a rich man's fuel, diesel has the "common man's fuel" tag. The agrarian rural India depends on diesel and kerosene for its farming purposes, and freight charges are also depended on diesel. These make a hike in diesel prices a political issue in the country and successive governments have kept the diesel prices low by subsidizing them. Therefore, the government still regulates the diesel prices while petrol prices were deregulated two years ago.

Economists feel that it is high time the government woke up to the reality that diesel price subsidies are helping the rich rather than the poor farmers. "The sooner the government bites the bullet, the better," Business Today quoted Sunil Sinha, director, Research, at ratings agency CRISIL.

Economists cite several reasons for deregulating both the diesel and kerosene.

It is argued that diesel hike will affect the agriculture sector. But analysts say it is wrong because dependence on diesel and kerosene for agricultural purposes has reduced over a time. This dependence can be further reduced if the amount of money the government spends on fuel subsidy is spent on improving the energy and power supply to rural areas.

Freight charge is another criterion for the government to keep the diesel prices reduced. However, experts feel that the government should work out a differential system of tariffs for public sector freight carriages.

The wide gap between the petrol and diesel prices is unscientific, as the higher petrol prices will lead to the rise in diesel car sales. High-priced diesel cars, especially the SUVs, get benefits from the cheap diesel and their rich owners will pocket the subsidies meant for the poor farmers. "It is unacceptable that government should continue to incur huge revenue losses. With each litre of petrol replaced by diesel to run a car, excise earnings drop seven times. These losses will increase with the growing share of diesel cars and SUVs. The effect is so dramatic that the excise earnings from both diesel and petrol are now nearly equal," said Anumita Roychowdhury, head of CSE's air pollution team.

Apart from this the, the Central government is estimated to have lost close to Rs 8 billion in fuel excise duties, just from the diesel used by the new diesel cars sold in 2010-11.

Moreover, economists point out that subsidies in present form really don't benefit the deserved, or the government, because any kind of loss suffered by the state-run oil companies, due to subsidies, are borne by the government itself. The current difference between the actual price of diesel and what the consumers pay for it is around 12-14 rupees per litre and this comes to billions of rupees a year. With an expected surge in diesel car market, this amount is set to increase.

The situation can worsen the Indian economy, which is going through a rough patch as the rising current account and fiscal deficit, policy paralysis, and depreciation of the rupee have affected the country's growth rate. India's Index of Industrial Production (IIP) averaged 2.8 percent in 2011/12, compared to 8.2 percent in 2010/11. The current account deficit stands at $19.6 billion in the October-December 2011 quarter, compared to the $10.1 billion a year earlier. Any government inaction on economic front will balloon the crisis further.

Another matter of concern is the environment, because the petrol price hike and the increased diesel car sales will lead to a rise in pollution and traffic congestion considerably. According to the Centre for Science and Environment (CSE) data, 50 percent of the total new car sales in India comprise of diesel cars and in the popular compact car segment, diesel cars form 70-75 percent of all car sales. "Government is ignoring the severe public health impacts of dieselization in Indian cities; the energy impacts of the steady shift towards bigger diesel cars and SUVs; and crippling revenue losses on account of subsidy of rich car owners," the CSE said. Pointing to the dangers of high dieselization on people's health, the CSE said, "The current emissions standards in India legally allow diesel cars to emit more particulate matter and nitrogen oxides. India is dieselizing without clean diesel (diesel with 10-ppm sulphur diesel and advanced emissions control systems)."

Analysts and trade bodies feel that economy needs a boost now to instill confidence in investors. Deregulating, and ending diesel subsidies will be the best step towards it.

They say the government should implement differential rates for the diesel SUVs and the farming sector to start with.

"As for the pricing, the full market price should be charged for diesel used for moving large cars and luxury buses, while the increase should be very moderate for others to begin with," Assocham (Associated Chambers of Commerce and Industry of India) secretary general D S Rawat was quoted as saying by Business Today.

The economists also feel that the government's current strategy of cutting the taxes will be counterproductive as by resorting to such measures, the government will be losing considerable revenue, which could be spent on infrastructure and development.

"If government gives up a major source of revenue like this, it could only do so at the expense of either cutting sharply its development expenditure or raising the level of deficit financing. Either way it would be counterproductive for a government committed to raising the growth rate and also making this growth inclusive," Assocham said.

However, the government should be cautious in taking the step as it has to deal with the rising inflation. "It will not be an easy decision. Increasing the price would mean a further spike in inflation. There is a direct conflict between controlling inflation and increasing the price of diesel that cascades into inflation,"," Ajit Ranade, chief economist at the Aditya Birla Group, was quoted as saying by Business Today.

Why India Should Hike Diesel Prices - International Business Times

 

[panduranghari]

All these gimmicks are just bandages for a man getting sicker. They need to have curbed corruption and increased electricity production to keep the GDP growth on the uptrend. Lack of power is destroying Indias growth. The GDP growth is directly proportional to the amount of electricity produced.

Electricity is a very narrow term in its scope. Energy is more appropriate term, would you agree? Nuclear is the only way.

 

[nrj]

Speaking of energy, the monumental use of diesel for power generation itself shows the pathetic state of energy sector.

 

[nrj]

Proposal to hike duty on diesel cars on card

New Delhi: Amid widening price difference between petrol and diesel, the Finance Ministry is looking at the possibility of raising excise duty on diesel cars, a suggestion which was mooted long back by the Oil Ministry.

"Hiking excise duty on diesel cars is still on the agenda. It was not taken up during the Budget. It will take some time. It will happen," a Finance Ministry official said.

To discourage consumption of subsidised diesel by personal vehicle owners, the Petroleum Ministry had suggested imposition of higher duty on purchase of diesel cars.

While the Petroleum Ministry has been asking for a hike in the excise duty on diesel cars, the Heavy Industries Ministry is opposing the move.

The Oil Ministry has argued that the additional amount garnered can be used to make good a part of the loss that fuel retailers incur on the sale of diesel at government-controlled rates.

"There are two views to the proposal. We are trying to work out a consensus. The Budget has just passed and any changes could take some time," the source added.

With the recent hike of over Rs 7.50 per litre in petrol prices, the difference between retail prices of petrol and diesel has widened further. While the per litre diesel price in Delhi is around Rs 40, petrol costs as much as Rs 74.

The Kirit Parikh Committee on Energy had also suggested a one-time additional excise duty of Rs 80,000 on diesel cars, arguing that it would offset the higher excise duty on petrol.

Diesel is the most consumed fuel in the country but is sold at a discount to its imported cost. The government is providing a subsidy of Rs 15.35 a litre to oil marketing companies for selling diesel at lower than market rates.

Subsidised diesel is the preferred fuel for the transport sector (both trucks and passenger buses) and is also used in irrigation pumps and other agriculture equipment.

Luxury cars and SUVs also run on diesel and so do power generators at malls and telecom towers.

It has long been argued that the rich should not get subsidised fuel. According to Oil Ministry estimates, 15 percent of diesel consumption is accounted for by personal cars and SUVs.

Finance Minister Pranab Mukherjee in Budget 2012-13 has hiked the excise duties for petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc, but the length exceeding four metres to 24 percent from 22 percent and a fixed duty of Rs 15,000.

Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively will now be charged with an ad valorem duty of 27 percent, instead of the earlier 22 percent and a fixed duty of Rs 15,000.

PTI

 

[trackwhack]

Diesel is the more efficient and hence cleaner fuel. Is there no other way around this problem than an additional excise duty?

 

[pmaitra]

Diesel is the more efficient and hence cleaner fuel. Is there no other way around this problem than an additional excise duty?

Depends upon the type of diesel you use and the type of engine you burn it in. Diesels with low-sulphur content is cleaner, but not the one with high sulphur content. Diesel also needs to be treated before exhaust. BMW diesels use urea based liquid to treat the effluents while VW diesels use a particle remover on their exhausts. Diesel vehicles also need the turbo-charger to get the maximum bang out of the buck.

Moreover, diesel engines are heavier, more expensive, and have costly parts compared to petrol engines. So the government needs to formulate policies if it wants to encourage diesel powered vehicles. In that case, they will have to remove subsidies on diesel and give tax breaks on new or first time diesel vehicle purchase.

How are you going to take care of this?

 

[Sakal Gharelu Ustad]

Indian govt. is the best example among govts. formulating incoherent and myopic economic policies. It is waiting for the diesel car manufacturers and others to do massive investment in the production line so that some years later it can kill their business.

Look at all the recent decisions. You do not increase rail fare for 10 years and then increase steeply in a day. Since Mamta blocked it this year, the bitter pill is now reserved for some other year. Again, if some one ask her which year to do it, you will get no answers. This myopia is startling.

 

[pmaitra]

Indian govt. is the best example among govts. formulating incoherent and myopic economic policies. It is waiting for the diesel car manufacturers and others to do massive investment in the production line so that some years later it can kill their business.

Look at all the recent decisions. You do not increase rail fare for 10 years and then increase steeply in a day. Since Mamta blocked it this year, the bitter pill is now reserved for some other year. Again, if some one ask her which year to do it, you will get no answers. This myopia is startling.

Minor nitpick: It's 8 years, not 10.

 

[Ray]

Diesel is cleaner than petrol is a subjective statement.

Everything is based on how 'sweet' it is!

****************

Some facts.

1 barrel of crude oil = 42 US gallons (159 liters or 35 imperial gallons). It produces from about 21 percent to 35 percent of gasoline or petrol, plus many other products such as kerosene, etc.

More detail:

The yield of gasoline from crude oil depends upon the quality of the crude oil ("Crude Type"), and the amount and type of processing at the refinery.

So called "light" crude yields usually more gasoline per barrel than "heavy" crude, for a given amount of refinery processing. That a crude is "sweet" refers to sulphur content, - sweet makes it low sulphur and sour high sulphur, and a "package" to remove sulphur is called a "Crude Sweetener". Producing gasoline involves two steps in the refinery, beside post-processing. First is the distillation of the gasoline stream from the crude, and then the refomation of this to "hike it up". The final refomation is to adjust to the actual "Octane" numbers and add ingredients to make it suited for cars - such as lead in old days, now various alcohols and glycol to achieve the same.

More extensive processing -- cracking, reformation, etc. -- can greatly improve yields, but of course, at the cost of the increased processing. Overall, refineries in the USA are yielding about 49% gasoline (20.5 gallons) from the mix of crudes they process (2004 data).

Actually, a barrel of oil is 42 gallons. When the barrel is processed, you may get something like 15 gallons of gasoline, 9 gal. of fuel oil (See Gasoil / D2), 10 gal. of jet fuel (Kerosene) and 4 gal of other "heavy" products such as lubricants, grease, asphalt / bitumene and plastics and 4 gallons of lighter condensates/naphtha.

In energy equivalents, 1 barrel=42 u.s. gallons of oil is estimated to be around 19.5 u.s. gallons of gas (natural gas).

Not disputing the answer at all, but if crude is now $80 per barrel, this should make gasoline nearly $1,90 per gallon, and this without refining and transport costs and assumes that the other cuts of the crude can be sold to the same price!


Depending on where you are the response varies. When oil is refined, there are number of products that will result from the refining process, including gas, diesel, and other products. Depending on the "feedstock" of the refinary and what production goals were in mind in constructing the refinary, the output of gasoline, diesel, and other products varies. For example, in the US, the refinaries are aimed at maximum output of gasoline, so the crude types that are used produce about 2 liters of oil to process about 1 liter of gasoline. Change this, say use Canadian tar sand instead - and you will need 4 times the quantity of crude for the same amoiunt of gasoline. In EU however, more crude types are used, and the gasoline cut differs, i.e. 1.5 to 3.0 liters. That a refinary process heavy crudes will usually result in a good supply to the chemical industry of complex hydro-carbons that can be used to make e.g. kevlar, resins for glue and fibre-glass, and advance plastics. These plants will pay well for the chemicals, so operating a refinery is managing a complex equation. You may have a good agreement for producing the complex chemicals, there is a good market with a predicable price for gasoline, heating oil and jetfuel / kerosene - while the residue, huge amounts of bitumene or tar can only be sold at a low price as road and roof covering.

Answer

In a barrel of crude you need to divide it into separate parts. These parts are roughly:

Naphta and other condensates that has remained liquid.
Kerosene, where most is jet-fuel
Unleaded gasoline
Diesel fuel and heating/furnace oil
Engine oil
Gear oil
Grease
Tar/asphalt


So in a 55 gallon drum of crude you can see that a small percentage actually becomes gasoline. The exact number depends on the crude type but I hope this gives you a better idea.

The standard barrel of crude oil or other petroleum product (abbreviated BBL) is 42 US gallons (34.972 Imperial gallons or 158.987 L)- In short 158.987 litres of crude oil make 1 barrel. To the ISO system - the oil companies and surveyors use 7.3 BBL per MT, and 304 gallons (GLN) per MT - regardless of product and specific weight.

Read more: How much gasoline can be made from one barrel of crude oil

 

[sob]

India among worst affected by food inflation: Report

NEW DELHI: Climbing food prices across Asia, especially India, Bangladesh, Nepal and Laos, might hamper and slow down by atleast five years the region's efforts to eradicate extreme poverty and hunger under the Millennium Development Goals (MDG), a UN ESCAP ( Economic and Social Commission for Asia and the Pacific) report has cautioned.

The report says India is among the most affected countries on account of rising food prices. According to it, this prevented more than 19 million people in the region, a good chunk of them Indian, from pulling themselves out of poverty last year. That should sound a warning call to the government which is battling rising food prices somewhat lackadaisically thus far.


India among worst affected by food inflation: Report - Economic Times

Many of our friends have been trying to justify that the high food prices in India is a global phenomenon, but this article brings out the true picture- we are to blame for our own mess and we should not blame others for our faults.

 

[sob]

Proposal to hike duty on diesel cars on card

New Delhi: Amid widening price difference between petrol and diesel, the Finance Ministry is looking at the possibility of raising excise duty on diesel cars, a suggestion which was mooted long back by the Oil Ministry.

"Hiking excise duty on diesel cars is still on the agenda. It was not taken up during the Budget. It will take some time. It will happen," a Finance Ministry official said.

To discourage consumption of subsidised diesel by personal vehicle owners, the Petroleum Ministry had suggested imposition of higher duty on purchase of diesel cars.

While the Petroleum Ministry has been asking for a hike in the excise duty on diesel cars, the Heavy Industries Ministry is opposing the move.

The Oil Ministry has argued that the additional amount garnered can be used to make good a part of the loss that fuel retailers incur on the sale of diesel at government-controlled rates.

"There are two views to the proposal. We are trying to work out a consensus. The Budget has just passed and any changes could take some time," the source added.

With the recent hike of over Rs 7.50 per litre in petrol prices, the difference between retail prices of petrol and diesel has widened further. While the per litre diesel price in Delhi is around Rs 40, petrol costs as much as Rs 74.

The Kirit Parikh Committee on Energy had also suggested a one-time additional excise duty of Rs 80,000 on diesel cars, arguing that it would offset the higher excise duty on petrol.

Diesel is the most consumed fuel in the country but is sold at a discount to its imported cost. The government is providing a subsidy of Rs 15.35 a litre to oil marketing companies for selling diesel at lower than market rates.

Subsidised diesel is the preferred fuel for the transport sector (both trucks and passenger buses) and is also used in irrigation pumps and other agriculture equipment.

Luxury cars and SUVs also run on diesel and so do power generators at malls and telecom towers.

It has long been argued that the rich should not get subsidised fuel. According to Oil Ministry estimates, 15 percent of diesel consumption is accounted for by personal cars and SUVs.

Finance Minister Pranab Mukherjee in Budget 2012-13 has hiked the excise duties for petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc, but the length exceeding four metres to 24 percent from 22 percent and a fixed duty of Rs 15,000.

Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively will now be charged with an ad valorem duty of 27 percent, instead of the earlier 22 percent and a fixed duty of Rs 15,000.

PTI

Most of the Diesel cars being sold are under 1200 CC, which will escape the high tax. So shat does the Govt. end up doing. It is a tang dance where you go one step forward and two steps back.

Also Diesel is more fule efficient than petrol, so shouldn't the Govt. be encouraging people to use more of diesel than the inefficient petrol

 

[vikaskumar11233]

Petrol prices in India are costlier than the United States but cheaper than European countries, Minister of State for Petroleum and Natural Gas R P N Singh said on Tuesday.

Petrol in Delhi is priced at Rs 63.70 a litre, while the same in the USA is priced at Rs 42.82 per litre.

The price in India is more than any of its neighbours -- Pakistan (Rs 41.81 a litre), Sri Lanka (Rs 50.30 per litre), Bangladesh (Rs 44.80 a litre) and Nepal (Rs 63.24 per litre).

Now think what we have we to do?