BonFre

Budget 2012: not so bad!(pg2)

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Union Finance Ministry has been hinting on price rise on Diesel private vehicles. This could be in the tune of 80-100k. If this comes into effect, the significant Diesel advantage over Petrol will be lost by a mile. News link:  

 

Now picture this, Auto companies have invested significant ammounts on Diesel tech. developement & slow down in diesel cars sales will affect them. Also take into account that Auto companies are making the consumer pay a premium on diesel cars over similarly specked petrol models. This means a price rise by Govt. & resultant drop in sales of diesel cars could translate into lower profits for companies & thus this could force them to reduce the price gap between similar Diesel & Petrol cars.

 

Eg. on any regular Diesel car, a company is charging a Premium of ~ 70-100k over Petrol model. Now a price rise in tune of 80-100k would widen this gap. Obviously low sales will follow & Companies can easily reduce the burden by bridging the price gap between Diesel & Petrol cars & therefore for the end consumer, price would be the same as of now, with significantly lesser burden, maybe 10-25k more at the most, just in the name! So, overall the move by Central Govt. could reduce profits for the companies, more revenue for the Govt. & a little price hike for the consumers.

 

Though this is just an imagination of what all could happen but looks very logical.

 

P.S. Its imperative ot note that the developement costs of similar Diesel & Petrol cars is almost the same. Premium on Diesel cars is charged becasue of the demand for cheaper fuel powered vehicels. A significant price increase on Diesel cars could also translate into heavy discounts, if not straight-forward price cuts.
BornFree2012-01-29 08:50:21

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Prior to this there was a Info regarding the Survey indicating that Personal Diesel car accounts for even less than 1% or 0.6% to be precisely speaking.

So, Imposing additional taxes even after this, hints at targeting special Population segment to extract out money.

Just wondering how much Subsidized fuel a Diesel SUV with 10kmpl, MUV with 15kmpl & a Diesel car with 20kmpl can consume in an year against 3-4kmpl of a Truck plying 24x7 whole of the year.

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There are quite a few things which needs to be considered here.

1. Diesel can't be deregulated as petrol as this will impact the whole economy. Govt itself has ruled this action out.

2. The current proposal to increase excise duty hike on diesel vehicles has received strong opposition from SIAM

3. If the prices of diesel vehicles are hiked then will car manufacturers reduce their prices to offset this hike (considering their input costs)?

If yes, then i would say they had been making fool of the customers all these years by charging almost 1 lac premium over petrol counterparts.

Anyways since this price increase is aimed to curb the increasing diesel consumption by private vehicles so if manufacturers are able to offset it then the very aim of this exercise is defeated.

Also, as mentioned by dr_nishu, govt should consider what is the actual consumption of diesel that is done by private vehicles before jumping to any conclusion.

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@DrNishu

40% of Diesel consumed is consumed by private car owners.

This is a good move IMO and what it will do most is please petrol owning cars. The cheapest diesel car costs above 4 lacs on road. If petrol vehicles are thought of as luxury and that is why it is felt that petrol price can be deregulated, then owning a car costing above 4 lacs and travelling so much that diesel is neccessity is certainly a luxury and they should bear the brunt of rising oil prices.

This will also promote use of LPG and CNG vehicles. More and more car manugacturers will actively step into this field.  Also hopefully along with this government will anounce sops for hybrid technology.

@BF

What you are saying is correct but I dont feel it will be happening immediately. Companies will start doing that after 6-8 months of the tax when they see the market response.

@sachin

The aim of this exercise is to decrease the losses of OMCs because of high diesel consumption. If the companies are able to offset then, Governement gets huge amount of taxes, which would be used to provide relief to OMCs. So OMCs are secured com what may.

Also I dont think its Govt. motive to decrease consumption. Both petrol and diesel are refined simultaneously and companies have little control over output of petrol vs output of diesel or vice-versa. So if country wants more petrol, more diesel would also be made, and lower consumption of diesel would cause storage headaches.

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Now if all this is going to happen in the future soon, then what about the companies who are investing in diesel technology?? Should they stop the R&D on this fuel?

Also, the car companies who have made huge investments to produce diesel cars just because of consumer demand was so high and now after this taxation, this is for sure the demand for diesel cars will go down, so should these company not  offer the diesel car on price lower than the petrol ones?

 

 

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I was thinking of creating a new thread about this topic and just then I fount it :-D ...

The dilemma is I am getting a ready delivery Swift Vdi but now am incline towards Dzire Vdi for which i need to wait at least 2 months.

Now I fear that after waiting 2 months if the gov increases the taxes on Diesel vehicles I will be a big Fool.

Kindly suggest what are the chances of these taxes being levied ??

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Goenka, Im in a hurry to buy a car because of this very reason. Now Im not sure what quantum of price rise its gonna to be or whether there will be one or not but if news is to be belived, something will be coming around.

 

To play safe, I would suggest you to finalize a buy before the budget.

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I am not favour of this so called Diesel subsidary tax as people  buying Diesel cars don't mind paying intial premium for the car as day to day running cost matters to do them than intial cost.

Diesel cars still command premium compared to petrol cars and people still are willing to go that extra mile for diesel car so demand will not decrease , but sales of higher end will be affected as more people will go towards low to mid variants.

 

@Rahul1810 - I am sorry to say OMC are not making any lose its just false informtion .If you see the Indian crude basket we pay more than crude is trading at.And if these comapnies are really losing money why pay credit to airlines in tune of hundreds of crores where as we customer can never given credit smiley7.gif it simply does not make any sense.

 

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@GOLF

I dont think that OMCs will be stating wrong nos in their balance sheets as that is fraud, and if you have any proof of this happening then you should file a case against them.

Credit is paid to airlines because it is difficult to keep accounts with them over every single transaction. Even petrol pump dealers get some amount of credit. Also when credit goes too high they stop supply, a case too often seen with Air India and Kingfisher these days.

Also there are 10 airlines and a billion people, you make the sense of whom they can give credit.

@goenka

Book Dzire and ensure from the dealer that you have the right to cancel if the tax comes in place. If it comes, look at CNG alternatives.

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What should be the fate of radio taxis, commercial taxis and rent a car operators?

Most of this market buys car that private owners use. Is the tax only on private buy ? Or for any buy that involves diesel cars?

Btw I feel that a proper check on commercial carriers like Trucks and Buses will do more good than imposing these tax.

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Good view of the tax to be levied. But then I'd like to ask: will an entry level diesel like a Chevy Beat be taxed Rs. 81,000 and say an Audi Q7 also taxed the same amount?

Also, its only fair to ask the existing diesel vehicle owners to pay up for the tax amount proportionately to the number of years that they have used it?

Alternatively, can the govt. think of dual pricing method? Its always been in existence in EU. Why not decontrol the diesel prices for passenger (private) vehicles and provide subsidy to only the section that is meant to receive it?

In the end, its only fair to ask private diesel vehicle owners to pay up the actual amount of the fuel. This is nothing against the subsidy that they enjoy today, and not because petrol vehicle owners have to shell out more. Its simply because these people are not entitled to the subsidy!!

So what's wrong if the govt. is taking a few steps to make sure that only people who are intended to, avail the benefits? They know they hadn't made any provision to counter this earlier - but better late than never.

But in my opinion, if the govt. is to tax the cars, they better tax it as a percentage of the invoice price rather than a fixed sum.

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Alternatively' date=' can the govt. think of dual pricing method? Its always been in existence in EU. Why not decontrol the diesel prices for passenger (private) vehicles and provide subsidy to only the section that is meant to receive it?

In the end, its only fair to ask private diesel vehicle owners to pay up the actual amount of the fuel. This is nothing against the subsidy that they enjoy today, and not because petrol vehicle owners have to shell out more. Its simply because these people are not entitled to the subsidy!!
So what's wrong if the govt. is taking a few steps to make sure that only people who are intended to, avail the benefits? They know they hadn't made any provision to counter this earlier - but better late than never.

But in my opinion, if the govt. is to tax the cars, they better tax it as a percentage of the invoice price rather than a fixed sum.
[/quote']

 

 

Then here is a twist. The twist is that people who are farmers, have tractors & people who are truck owners, have goods carrier company will eventually see a new business opportunity.

 

Buy Diesel at 45 Rs/Ltr and sell it at may be 70 Rs/Ltr (same as petrol). This is probably the reason why GOI can not or is not willing to decontrol the diesel. 

 

And as far as these privately run, non-approved, illegal petrol pumps are concerned....then they are running even in Delhi region so forget to think about the chances of opening such outlets in other parts of India.

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I agree Sstar.

Its not going to be easy for the govt. to find a solution on this one.

What I can see as a simple solution is - a percentage tax/sum on the WDV of the vehicle like an insurance premium to be paid every year - maybe along with the insurance premium itself if its a diesel. This may/may not offset the subsidy but will recover a good amount towards it.

The govt. then only needs to add a clause for the insurance companies to collect this sum and deposit it with the govt. probably deducting a service charge/facilitation money.

This way, they can tax the existing diesel car owners as well.. and that too proportionately.

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Regarding Diesel pricing Kirit Parikh committee made two recommendations:

1. decontrol the diesel prices.

2. Tax approx. Rs. 80,000/- on private passenger diesel vehicles to make up for the difference in excise duty on petrol & diesel.

I would like to sat that even if the central Govt. deregulate diesel, there will not be a major hike in diesel price. It may be Rs. 2 - 4 at the max. Once this is done, there will be no subsidy on diesel. So the proposed tax on vehicles is not linked to this.

Central excise on diesel is approx. Rs 2.50 and on petrol Approx. Rs. 14.50. Govt. charges this much less excise on diesel due to its usage in various sectors, as discussed in detail in this forum and can not make it same for both petrol and diesel. This is the only tax, due to which a private diesel car/SUV owner gets undue benefit vis a vis a petrol car/SUV owner. To compensate this very differential only, the Kirit Parikh committee recommended to tax diesel cars / SUVs upfront, based on some calculations.

Therefore, This additional tax has nothing to do with deregulation of diesel prices. It can be imposed even if diesel is deregulated. It is to compensate the lower excise duty on diesel being enjoyed by private diesel car / SUV owners.

The diesel car owners will still be enjoying lower state taxes (VAT), which is approx. 20% on petrol where as it is Approx. 12.5% on diesel in most of the states.

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@Neerajd: I think this is a relatively acceptable option from Diesel car owner's point of view. But I feel it will force manufacturers to bring down the diesel car ExS.P so as to attract car buyer towards diesel.

 

 

Wow...so we are expecting an atleast 80K slap on the face of diesel car lovers. http://archive.autocarindia.com/autocar_forum/smileys/smiley21.gif' target="_blank">

 

 smiley21.gif

Sstar2012-03-06 16:01:10

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IMHO, the rise in price wont be too significant since the home grown manufactures sells more the 90% of its cars in Diesel avatar, so its an exercise of killing home manufactures, so Govt needs to safeguard our Auto Industries too.

IIRC, the Manufacturing Cost of Petrol car is equal to Diesel car and the selling price of both are almost equal in most foreign countries. So this 80k( if increased) could be absorbed by manufacturers.

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IMO 10% tax is just too much for a diesel vehicle even if the manufacturer reduces the diesel price by 30k still the new tax system will be too much . But its a good decision in its own my but I don't like the implementation .

 

To me 15% tax for diesel car above 20 lakhs ex showroom  then 10% tax from 10 lakhs and 7% for below 10lakhs segment seems fair for the next 2-3 years atleast .

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Breaking News:

Government cuts EPF to 8.25 from 9.50%.

Poor Govt. n Poorest population.

Reminds me one of the famous Hindi saying from School days which became true now,"Aandher nagri, chaupaat Raja"

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