Once again, the petrol price increased by the union govt. for whopping Rs. 7.50 in a single shot. It is directly hits the common man’s belly. According to their statement, petrol prices won’t impact the people because diesel prices are directly related to the public transport. Does it make a sense?. Who are using the two wheelers?. If they invent a bike which can run on Diesel would be best discovery of the century. It is obvious that petrol is mostly used by the common man for their two wheelers and petrol cars. If you are rich, you might have a diesel car, not affected by this price hike. huh!! good logic by the govt(!?).
The reason given by them for the price hike is depreciation in the rupee value. Why the rupee value is going down?. It is mainly because of the larger import than the export. It clearly shows that India is showing the negative growth in all the industries for the past few years. It make the foreign investors pull out their money from the Indian market and companies to invest in the safe place. It cause the further decline in the rupee value. If a govt. wants to stable their currency, they have to improve the economy by making reforms on the different industries. Sadly, most of the reforms are not at all passed because of the political matters.
also read:
It is not the first time they hiked the fuel prices. It happened over a long period of time and not it is in the not tolerable situation. I can bet, petrol price would touch Rs. 100 by end of this year if our govt. is not managing their finance properly. When the rupee value is increased, the subsidy for giving the fuel prices would go high. It makes the govt. to borrow more money from other countries. It results in paying the huge amount for interest alone, makes things worse.
One of my earlier posts, I have detailed out the principle behind the oil prices and why the govt. has deregulated the petrol prices. Thank God!! Diesel prices are not yet deregulated ! If that happens, every fortnight we can see the price hike for diesel prices. Read my previous article about Why the Oil price crisis in India?. It explains all the facts about the oil prices in India. I am no longer going to write about the oil price in this post!. Let them realize and stop it!
The below table shows the latest petrol prices (25-May-2012) with the break up of taxes levies from the customers.
If you want to speak out about this issue, please post it in the comments section.
May 28, 2012 at 4:36 am
Hi,
Thanks for the article. Very informative and easy to understand. Keep up the good work. I have one question though, why do we need to peg INR against USD when we are doing business with gulf countries? Can we not just transact in INR v/s AED? Only reason for asking question is if we eliminate USD we may be able to stabilize the fluctuation in rate against AED right?
Thanks,
Vinod.
May 28, 2012 at 5:59 am
HI Vinod,
There is no straight answer to your question. USD is the global currency. Yes, if we want we can transact in other currencies. But, America will not like it. Also it is easy to trade in the USD because it is accepted as the global currency.
US is forcing every country to use their currencies because countries like China, Europe started bringing their currencies to the global trade. However, India is still long way to go for taking our own decision
. We rely on US for everything.
Thanks,
Krishna
May 28, 2012 at 7:39 am
Hi, Very good clarity in your articles. Thanks.
One question here – In your earlier posts you mentioned that oil prices consists of 3 components. 1) Excise duty, 2) Customs duty 3) VAT
So the Central and State taxes you mentioned in this article belongs to VAT?
does that mean VAT is more than 20% now and what component consists of customs and excise duty?
May 28, 2012 at 7:57 am
HI Vinoth,
To clarify I have taken this example:
For example, in Bangalore, if price of petrol is 71.09 per litre. Out of this, 17.06 go to Govt of India in the form of excise and customs tax. 16.63 is collected by state government in the form of sales tax and entry tax. Thus, a total of 33.69 is collected due to various taxes (which accounts for around 47% of the total price).
So, central takes the excise and customs tax and states takes the VAT or sales tax.
Are you clear now?
Thanks,
Krishna
May 28, 2012 at 8:32 am
Hi Krishna, That’s great. Clarifies my doubt.
This raises another curios question.
1) What does the govt do with the such a high exorbitant taxes (nearly 50%)? Petrol prices are deregulated – So should that not correspond to tax cuts and price volatility of non-tax components?
2) what especially does state govt do with the VAT money? I don’t think it will be used for subsidizing oil companies? (What is the use in levying tax to common man to subsidize the same common man?)
May 28, 2012 at 8:48 am
HI Vinoth,
These questions can not be answered by us
. We are only paying the tax, politicians has to tell us that what they are doing with the money. Our govt. is not at all transparent on what they are doing?
They are saying that petrol price deregulation is for reducing the loss for oil companies. It is not at all true. They are making the huge profit.
Yes, they are taking the tax and giving the subsidy
. Oil price in our country must be reduced, otherwise we are going to see the high inflation rates.
Thanks,
Krishna
May 28, 2012 at 8:49 am
hmm.. well said.. anyway thanks for your articles again..
June 22, 2012 at 6:29 pm
You are welcome.
Thanks,
Krishna
May 28, 2012 at 8:54 am
Hi Vinod,
Thank you for the comments.
Thanks,
Krishna
June 10, 2012 at 10:38 am
Hai krishna, how increase in the price of oil leads to inflatn?plz tel me.
June 22, 2012 at 1:40 am
Hi Ganesh,
When the demand of a product is more or Constant and supply is less than required., this leads to hike of a specific product.
June 22, 2012 at 2:50 am
Hi Elite,
Thank you for replying the comments.
Thanks,Krishna
June 22, 2012 at 2:48 am
Hello Ganesh,
One simple example, In Bangalore Auto Rick saws has increased the fair by 15% in the last month. When we ask the reason, steep increase in the petrol price. So, Diesel is not the only one affects the inflation, petrol also impacts lot.
My opinion is that, petrol price increase only affects the middle class family. Who is using two wheeler?. If you own BMW, not affected by this govt’s policy
Thanks,
Krishna
June 22, 2012 at 9:05 am
Even if Diesel price is hiked owners of BMW’s won’t have any issue in paying those extra – still middle class will bear the load..with much perseverance..as we always show. I fear it may get to a situation when public start freaking out and get violent against govt. similar to what happened in London recently but much more catastrophic. This will be surely taken advantage off by religious fanatics as well to create more violence and India will get back to ages .. create more rough time ahead..
Thanks for your posts Krishna, appreciate for the same – what is the next level we can take this. Anna alone cannot help India..
June 22, 2012 at 10:15 am
Hello anand,
Lot of changes needed. We have to create awareness among the people.
First when we Indians eliminate the religious politics, can expect the changes.
I am afraid India should change before any violence comes up.
Thanks,
Krishna
June 22, 2012 at 11:18 am
As world has already started losing confidence on Indian trade and we ‘Indians’ conveying the same message over and over between us from across the world..what best can we do..difficult for change to happen if it is maintained not to change..
Even though we are all in the same system, those who maintain this system is obviously govt. If govt is not changing we don’t need that govt. Need whole new govt – educated youngster’s party with some basic qualification. Atleast 50% of the parliament need to be replaced with well qualified youngsters..graduates, PGs, MCOM, MBA pass outs and vounteered and intersted in social upheaval activities..
June 22, 2012 at 6:27 pm
Yes. We need change. We have lot of talents (it s not about young. We have so many economists and scientists with good experience. Our govt. not using then)
Thanks,
Krishna
July 3, 2012 at 12:46 am
Hi Krishna,
In this post i have lots of doubt, because i feel there is no need to increase the prices of petrol…Reason :
1. As the global value of crude oil itself fall from 5700 to 4700 around from Feb to may 2012.( as i m trader in commodity also and these rates are also taken from MCX) which is almost 20% decline.
2. If you check the profits of last quarter posted by oil companies in India. that was 3 fold and 4 fold as compared to there previous qtr profits. Just check IOCL and HPCL profits.
its really shameful for the country as well as for us that so called economist like Manmohan and Alluwaliya in core committee are unable to handle such situation.
July 3, 2012 at 4:01 am
Hello Sonu Bhojwani,
You are correct!!
see the situation when the crude prices are falling to the bottom, our govt. good not control the price. imagine if the crude price goes to $110+.
Crude prices increased or rupee prices falling, all are just for the excuses. good team can handle any tough situation.
Thanks,
Krishna
August 3, 2012 at 1:45 am
So how long until I can print in steel and make new parts for my M1?
September 23, 2012 at 10:43 am
Could you please breakup the Diesel price the same manner?
September 23, 2012 at 2:42 pm
There are no clear details on this. Most of this is running on the subsidy.
Thanks,
Krishna