[romeomidhun]

Originally Posted by poloman

How will that money go to exchequer? That money was going to some Arab country for buying crude at $120.

Whatever be the price in India, the base price of the crude has to be given to Arab or from whoever we buy oil. When the crude was around $120, even at higher prices in India, the govt had to give subsidies to oil companies. Now, they are making profit.

Do you think, at a later stage, when crude rises to $120, Petrol will be sold (in Chennai) for Rs 78? It will be around Rs 90, if things go like this. IMO, the saying "barking dog seldom bites" has to be reviewed in current circumstances - it bites too.

[commonman]

Though,this discussion is going political,would like to share my two cents.
Government taxation structure had created a big black hole. We actually don't know what happens to our money, that goes to government as taxes. Add to that ,we get a budget every year ,which shows deficit.New schemes are projected every year by subsequent governments to get popularity.Government may change ,but the tax structure nor the system is changing. The entire episode of this excise duty increase, is an example of this phenomena.Its sited that every 100 Rs petrol you buy 40 Rs. goes to government as taxes and duties.

We get to know about our losses, only through CAG audit reports,which again, is attacked by the politicians.Unless we have a transparent tax structure, which is simple and explainable, this will continue. Another step forward, we need to take out all subsidies,(just like removing fuel subsidies) as subsidies are one more reason sited for taxing the population again and again.Please note ,earlier fuel subsidy used to be government's biggest worry and now they are accepting that this is their best source of income by increasing duties.
Next move should be to take out all the populist schemes like NREGA ,which is creating more burden on the government and at the same time not contributing to the economy.The last move must be to cut down or re distribute the government machinery to make it more efficient and corruption free.All these requires a strong commitment to people and sound knowledge of the economic fundamentals.

So, to tell the truth, unless our way of working don't change, the deregulation claim is not going to work.

[poloman]

Originally Posted by romeomidhun

Whatever be the price in India, the base price of the crude has to be given to Arab or from whoever we buy oil. When the crude was around $120, even at higher prices in India, the govt had to give subsidies to oil companies. Now, they are making profit.

Please understand the context. gsurya told when prices of petrol and diesel was being increased extra money was going to treasury. That is when I made this statement. When crude prices are increasing and if you increase the price of petrol and diesel that is done to cover the losses in importing crude. No extra money will go to exchequer. On the contrary excise and VAT was cut to reduce burden to the consumers stressing the govt finances even more.
But when crude prices are falling and oil companies are making profit, Govt can increase duties to strengthen the exchequer.
I don't want to indulge in a political discussion on an automotive forum, so purposefully ignoring the comments made on the "excellent" financial prudence of previous Govt.

[civic-sense]

Originally Posted by poloman

Please understand the context. gsurya told when prices of petrol and diesel was being increased extra money was going to treasury. That is when I made this statement. When crude prices are increasing and if you increase the price of petrol and diesel that is done to cover the losses in importing crude. No extra money will go to exchequer. On the contrary excise and VAT was cut to reduce burden to the consumers stressing the govt finances even more.
But when crude prices are falling and oil companies are making profit, Govt can increase duties to strengthen the exchequer.

What is lost here is the perspective. Money saved is money earned.

Again, raising prices when crude was expensive was saner than raising taxes when crude is cheaper.

[gsurya]

The 'market pricing' fraud that is being perpetrated on citizens

http://www.financialexpress.com/arti...il-mess/15466/

[EasyR1der]

Originally Posted by poloman

Who is Govt? Is it a monster? It represents you and me. This money is going to exchequer only. Which country in the world, where you have less than 3% pay income tax? In some Western countries personal income tax is as high as 60%. Also check on gas prices in European countries?

If in India as you said only 3% of people pay income tax, looks like a failure of tax system. Instead of correcting the system if we try quick-fixes to get over the budget deficit (patch work policies).

As previously voiced on the thread (longhorn)"Take your taxes and stop poking your nose in fuel pricing"

[sgiitk]

Originally Posted by civic-sense

Again, raising prices when crude was expensive was saner than raising taxes when crude is cheaper.

Agreed, but that is history. With VAT being ad valoreum many states are feeling the pinch of lower oil prices, and some have increased VAT so we still end up paying more. I think the trick of absorbing some of the price drop in Excise is a very good option.

Incidentally MDA expects Brent Crude to remain in the $65-75 band in the near term.

[pgsagar]

Originally Posted by poloman

Which country in the world, where you have less than 3% pay income tax?

Ok, since only 3% per cent people pay income tax, let us clobber all the petrol buying guys to make up for that loss. Is that what you meant? Some logic you have there!

[zenren]

Originally Posted by EasyR1der

If in India as you said only 3% of people pay income tax, looks like a failure of tax system. Instead of correcting the system if we try quick-fixes to get over the budget deficit (patch work policies).

Originally Posted by pgsagar

Ok, since only 3% per cent people pay income tax, let us clobber all the petrol buying guys to make up for that loss. Is that what you meant? Some logic you have there!

While I'm not in favour of increasing the taxes on fuel to compensate the losses elsewhere, it is still better than going after that 3% income tax payers.

Gradually, our government is increasing the slabs for income tax and transferring those costs to other areas where everyone has to pay without choice and cannot evade. The window of the 10-20-30% slabs have been extended in the recent years to ensure that the ordinary salaried class was able to take home a bigger amount from their paycheck. This was not a charity drive from the government. This was just an additional amount given to the common man to buy the commodities that were about to be taxed higher.

The advantage with the above model is that the burden on an income tax-paying individual is reduced since the businessmen who drive a Mercedes and don't come under the tax bracket would be forced to pay these indirect taxes.

That said, the government should be willing to reduce these increased taxes when the fuel price goes up again. They should cap the tax component in the fuel price to cushion the impact in case the fuel gets costlier again, which is what the subsidized and regulated model did.

[gsurya]

Originally Posted by poloman

Please understand the context. gsurya told when prices of petrol and diesel was being increased extra money was going to treasury. That is when I made this statement. When crude prices are increasing and if you increase the price of petrol and diesel that is done to cover the losses in importing crude. No extra money will go to exchequer. On the contrary excise and VAT was cut to reduce burden to the consumers stressing the govt finances even more.

I am still unable to understand the economics of this argument.

2 yrs back, crude spiked to 118$ & we were paying from the same exchequer to cover the difference from what was being recovered from consumers, so the prices were hiked & at the same time customs duty was reduced to 0% & excise duty reduced by 5%. This was then protested against by the opposition via two Bharat Bandhs & one can also go to the posts on this same thread in 2012 to read the reactions here

Now with crude collapsing by 40% to 67$, these same guys have not only not let the fuel price component fall enough, but also hiked the excise duty component to bring in 20K crores of revenue that was 'lost' due to falling crude prices! That's just utter hypocrisy any way you try to justify it, even if its economically unavoidable.

[poloman]

Originally Posted by zenren

The advantage with the above model is that the burden on an income tax-paying individual is reduced since the businessmen who drive a Mercedes and don't come under the tax bracket would be forced to pay these indirect taxes.

Well said. service tax is another one implemented to net these kind of individuals who never pay taxes honestly.

Originally Posted by gsurya

I am still unable to understand the economics of this argument.

You agree to the economics of this but not politics. Your main grudge is the party in present opposition did bharat bandhs when the petrol prices were being hiked. But was the reason for hike communicated effectively to general public by the then Govt.
Now that prices are going down i don't see the current opposition doing any Bharat Bandhs, imagine what will happen if they start raising prices. Min 2 Bharat bandhs guaranteed. So parties will square off any way. Why waste time discussing that again and again. I am not in sync many policies of current Govt. So I am not a fanboy. But so long as general inflation is down which was more alarming to me, I will be a happy subject.

[gsurya]

Originally Posted by poloman

You agree to the economics of this but not politics. Your main grudge is the party in present opposition did bharat bandhs when the petrol prices were being hiked. But was the reason for hike communicated effectively to general public by the then Govt.

A Govt is measured by what they do when times are tough; as the previous Govt faced on this account; I didnt need much communication to know why they had to increase fuel prices when crude zoomed to 118$.

This Govt has it really easy now with lowest crude prices in a decade, instead of tinkering with excise duties, can it push for fuel being included in GST & completely decontrolling fuel? That will prove they are up to it, despite what they said before.

[andydude]

Today's TOI editorial calls it DIRTY FUEL TAX that makes farce out of fuel deregulation.

http://blogs.timesofindia.indiatimes...-deregulation/

[longhorn]

What I'm looking for is some sort of correlation between what the govt says and what it does. When their stated policy was to deregulate fuel pricing (which again was a continuation of the previous govt's policy), what I'm seeing is the exact opposite of what is being stated. Best way to deregulate is to have a fixed amount as taxes (VAT+excise+cess) and let the oil companies fix the price based on what they pay for crude.

The last time excise duty was hiked it was acceptable. The 2nd hike is totally unjustified. The govt is acting like those housing finance companies whose base rate always goes up whenever RBI hikes the repo rate, but never comes down when the RBI reduces it.

As long as the Saudis don't cut production (which seems unlikely now) crude is not going to cross 75-80 $ per barrel. In this scenario, I might as well enjoy the lower prices while it lasts, rather than the govt save up for me now and stop the price hike at a later date (which anyways is not going to happen).

A 40% drop in the cost of crude has led to a drop of just 17% in the price of petrol at the pump - this is just not done.

EDIT: The FM was prodding Raghuram Rajan to get the RBI to cut rates. I'm happy he didn't succumb to the pressure. He's one of those few sensible people I see out there, and the govt doesn't have many people made of such stuff. If the FM would have reduced fuel prices instead, it would have done its bit to reduce inflation.

[saurabhkum]

Originally Posted by longhorn

What I'm looking for is some sort of correlation between what the govt says and what it does. When their stated policy was to deregulate fuel pricing (which again was a continuation of the previous govt's policy), what I'm seeing is the exact opposite of what is being stated. Best way to deregulate is to have a fixed amount as taxes (VAT+excise+cess) and let the oil companies fix the price based on what they pay for crude.

The last time excise duty was hiked it was acceptable. The 2nd hike is totally unjustified. The govt is acting like those housing finance companies whose base rate always goes up whenever RBI hikes the repo rate, but never comes down when the RBI reduces it.

As long as the Saudis don't cut production (which seems unlikely now) crude is not going to cross 75-80 $ per barrel. In this scenario, I might as well enjoy the lower prices while it lasts, rather than the govt save up for me now and stop the price hike at a later date (which anyways is not going to happen).

A 40% drop in the cost of crude has led to a drop of just 17% in the price of petrol at the pump - this is just not done.

EDIT: The FM was prodding Raghuram Rajan to get the RBI to cut rates. I'm happy he didn't succumb to the pressure. He's one of those few sensible people I see out there, and the govt doesn't have many people made of such stuff. If the FM would have reduced fuel prices instead, it would have done its bit to reduce inflation.

Plus 1 to this. It's really good to have a good RBI Governer who is not ready to give in to political pressure. Now i think it's a distant dream to see petrol price at 60 ( 2010-11) levels in Mumbai. Even if tomorrow crude drops to 40, this govt is ready to keep all the benefit for himself. I know it's very difficult to run a country or define policies for the country, but it hurts me more that some policies which were designed earlier for benefit of public and country is being changed to get more and more benefit or to hide the inefficiency of their decision and policies.