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Posts tagged ‘gordion knot’

Diesel Vs. Petrol – the subsidy story!

To have an overview of the cost and process of refining of crude oil, the following links may be of some use. So before proceeding further, it would be better for lay persons to acquaint themselves with the process of REFINING and the COSTS involved to have a vague idea of the cost of petrol and diesel at the pump.

Everything would look simple, if the refining is done by a REFINING COMPANY, fixes its cost of the crude adds the refining cost and includes its margin on each product and sells the various products to the DISTRIBUTORS at a particular price and the distributor in turn sells it to a MARKETING COMPANIES and each in the process, adds its own margins and sells the various products such as petrol, diesel, kerosene, bitumen etc. etc. in retail to the consumers.

But that is not the case in India. The process is so CONVOLUTED that there is something called the ADMINISTERED PRICES and SUBSIDIES which intervene and make the whole process TRANSLUCENT- it is neither transparent nor opaque. The whole process is like a Gordian knot, all rolled up into a knot so that while  each ministry  works on one knot, unwittingly  creates another knot somewhere else in another Ministry.

The various knots include the DIESEL required for transport, Diesel used for passenger cars, Kerosene supplied through the public distribution system at subsidised rates and the other products. The most favoured whipping child is the use of DIESEL FOR PASSENGER CARS! In a democracy, people’s opinion is THE ONLY THING. Especially, a mass opinion which might have an impact at the hustings.

The question which is put in favour of not allowing the passenger cars using Diesel is that, when a person  uses petrol, he  spends Rs 7.50 per kilometre (Rs 75 per liter divided by 10 kms). So why should a diesel car owner be allowed in a SOCIALISTIC STATE to run his car  by spending only Rs 2.5 per kilometer( Rs 45 per liter divided by 18kms)?

The answer is that a diesel car costs more and he had coughed up a higher capital cost on acquisition of his car. The difference between a petrol and a diesel car is atleast 1.5 lakhs on road. So a diesel car owner had paid higher Road Tax and other Taxes and seeing the cost benefits of running the car, the Government and the car companies have already skimmed out their share, which on interest terms is already Rs 27, 000/- per year calculated at the cost of 18% PA on Rs. 1, 50, 000/-.

Further the passenger car segment usage of diesel is only 8% of the total consumption of diesel in India. So why target the passenger car segment? Because the RECURRING BENEFITS of diesel car usage IRRITATES the EYES of the petrol car owner. They turn SOCIALISTIC and say that the diesel passenger car owners are enjoying the SUBSIDIES provided by the government to the TRUCKS for keeping the transport cost low!

Can anyone work out the  cost benefit to the banks which have lent MORE money for purchase of Diesel cars?

Will anyone talk of the higher revenues earned by the  Government by charging Ad valorem Road Tax on diesel passenger cars for 15 years in advance?



Let us get RATIONAL.

Further let us give Indians a chance to see the whole of India with their families at a cost of Rs. 2.5/- per kilometre. And not get into an 8% segment which is insignificant compared to the notional losses incurred by the Government on a recurrent basis.

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