Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Why pay more for diesel?
Thu, 20 Sep Pre-Open

The government seems to have finally taken the bull by the horns. The Center recently announced easing norms for Foreign Direct Investment (FDI) in retail and aviation. Plus it hiked prices of diesel by Rs 5 per litre, its steepest ever hike much to the disdain of the opposition. Higher costs of diesel may help somewhat in fiscal consolidation, but it will also stoke inflation increasing the cost to ferry goods across the nation. The government also capped the sale of cheaper cooking gas to six cylinders a year for each family. The decision to limit the sale of subsidised liquefied petrol gas (LPG) will hit the monthly budget of households. Every seventh LPG cylinder in a year is now likely to cost Rs 743, nearly double the subsidised price of Rs 399.

Now, while these non-populist moves may be good for the financial health of the nation, are they veiling any hidden truths? Let's find out. The ministry of petroleum and natural gas says that the government collected Rs 837 bn in taxes on petroleum products and paid out Rs 1.4 trillion as subsidy compensation to oil marketing companies (OMCs) such as Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd. (HPCL), and Bharat Petroleum Corporation Ltd. (BPCL). Thus, the government of India was a net loser by more than half a trillion rupees. But, the harsh reality is that it did not pay out the entire Rs 1.4 trillion in cash.

What actually transpired was that it paid Rs 835 bn and asked the upstream oil and gas producers - Oil and Natural Gas Corporation (ONGC), Oil India and Gas Authority of India Ltd. (GAIL) to pick up the tap of around Rs 550 bn. Firstpost adjusted the subsidy payments paid by each of these companies and accounted for the private (i.e. non promoter) shareholding. It finally arrived at a figure of Rs 166.5 bn that private institutions and retail investors used to bail out the government. Plus, the duties collected are almost equal to the taxes paid, thus the government did not pay anything out of its own pocket in order to compensate the OMCs. It simply arm twisted the upstream producers. Unfortunately minority shareholders have to pay the price of public ownership.

So should the government roll back the diesel price hike? Well maybe not. These subsidies are simply unaffordable and will get more so as the price of oil increases and rupee depreciation continues. Under pricing these limited resources encourages their misuse. Encouraging renewable sources of energy, imposing carbon tax and pricing fuels based on their actual costs may be the way to go. But this is not without the risk of higher inflation and voter backlash.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Why pay more for diesel?". Click here!

  

Stock Market Updates

Sensex Falls 471 Points, Nifty Ends Below 14,700; Tata Steel & JSW Steel Top Losers (Today's Market)

May 12, 2021 Closing

Indian share markets ended on a negative note with the Sensex down by 471 points and the Nifty ending down by 154 points.

Sensex Trades Over 300 Points Lower, Dow Futures Down by 128 Points (Today's Market)

May 12, 2021 12:30 pm

BSE Sensex is trading down by 328 points, while the NSE Nifty is trading down by 89 points.

Sensex Dips 300 Points, Nifty Falls Below 14,800; Godrej Consumer Zooms 10% (Today's Market)

May 12, 2021 09:30 am

Indian share markets open lower. The BSE Sensex opened down by 325 points, while the Nifty is trading lower by 84 points.

SGX Nifty Trades Flat, Interglobe Aviation QIP, Rising Premium for Non-Life Insurers, and Buzzing Stocks Today (Today's Market)

May 12, 2021 Pre-Open

Top cues to track in today's stock market session.

View More Indian Share Market News

Most Popular

Are the Stock Markets Deaf to Covid Agony?(Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

My Secret to Find Breakthrough Stocks(Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

The Key to Profit from India's EV Revolution(Profit Hunter)

May 7, 2021

Stocks you must consider investing in before buying your first electric vehicle.

The Worst Sector in the Market(Fast Profits Daily)

May 11, 2021

The worst sector in the stock market according to the charts.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


May 12, 2021 (Close)

MARKET STATS