Citizens' Issues
Dual pricing of diesel: The FM may point a finger at passenger car owners, but four fingers point elsewhere

Is it only automobile owners who are responsible for misusing subsidised diesel for private vehicles? No, they aren't. But it would help to pull the chain on those who do, every now and then

This happens every six months or so. A cabinet minister (take your pick) makes an announcement about the misuse of diesel subsidies by owners of luxury cars. At one time, they would add German brand names like BMW, Audi and Mercedes Benz, but now they choose to often remain brand neutral. (Those summer trips to Germany can work wonders.)

Such statements immediately send the public relations people in the automobile industry into a huddle, the mainstream motoring media into a frenzy, and after all this-usually-nothing happens. Obviously, it will be absolutely next to impossible to administer a dual-pricing strategy for high speed diesel (HSD) sold through retail outlets. The stock market reacts accordingly, and shares of automobile manufacturers making diesel cars tank, then quietly recover in a few days.

But what is the real story?

Head out to any filling station. Correction, head out to a filling station owned and operated by a good friend, who will tell you the truth. Ask him, especially if his filling station is not in the urban metro cities, what percentage of his diesel sales go to motor vehicles, and where the rest goes.

Do not be surprised if he tells you that over 75% goes to what is informally known as the generator, residential, office and factory segment. Often in lots of 500-1,000 litres taken at one go, transported in everything from 225-litre drums mounted on donkey carts to home-grown tankers mounted on small trucks or towed by tractors. The oil companies like it-they have sales targets to meet, and incremental sales are always welcome. Like, create chaos at a toll booth centre, and reap higher fuel sales at filling stations up the road.

Higher diesel sales are directly linked to the fact that India shining and slipping is regardless of anything else going through this great manufacturing and commercial boom. All of them, as well as the personal residences (masquerading as "guest houses") of the people who run these great symbols of liberalisation, require huge big diesel generation sets. These diesel gensets in turn require large quantities of diesel. Leave everything else aside, there is a micro power generation capacity in India, most of which runs on HSD, meant for the automobile and agricultural sector. Renewable energy is mostly for the seminars and conferences and tax exemptions for HNIs.

The diesel subsidy provides genteel support to all these sectors. As well as to all government offices, banks, mobile phone towers, even the residences of the same cabinet ministers and their families and friends, and contact persons and staff, and the whole lot of them, including the media. Do you think they will want this subsidy withdrawn? Not at all.

But the issue is not as unresolvable as it is made out to be. Here are some simple solutions, which can be implemented tomorrow, if there is a will.

1) An annual "loading" on the insurance premium of all diesel-operated private cars, equal to the approximate subsidy for 50,000 km operation per annum, at the time of renewing the insurance premium. This is to be passed on by the insurance companies in toto to the finance ministry, along with service tax.

2) There must be a closer look at the audited accounts of larger taxpayers and their industries/commercial establishments. All expenses for diesel, for any reason whatsoever, should be taxed at the rate of subsidy that they enjoyed, and passed on in toto to the finance ministry, again along with service tax.
3) If possible, implementation of the law that sales of fuel from filling stations should only be into fuel tanks of motor vehicles. Forget it, this won't work, they have to work their own gen sets too. The huge IOC corporate office near my house in South Delhi, has some of the biggest gen sets in the country, and it seems that they also get their (subsidised) diesel from an IOC filling station next door, called "Centre-Half", owned by a famous hockey player.

At the end of the day, if the government is really serious about removing the misuse of the diesel subsidy, it will have to look within first. I would be very keen to know where the diesel required for running the gen sets, if any, at Parliament House comes from.



Rajiv Chawla

5 years ago

The facts: On 24th June, 2011, the central government reduced customs duty on petroleum products to only 2.5% from 7.5%, resulting in an annual revenue loss of Rs.49,000 crore to the Central govt.

Excise duty on diesel was also reduced from Rs4.60 per litre to only Rs2 per litre.

85% of our precious and scarce foreign currency reserves are spent on Oil imports.

India bears oil subsidy to the tune of Rs.1.5lac crores annually.

Corruption, seepage, siphoning and misutilisation increases with dual pricing systems. For example, Kerosene at PDS for BPL is Rs.5/- litre agains Rs.28 in open market. Hence, the massive leakage.

Corrections in PDS are extremely important while dual pricing results in just the opposite



In Reply to Rajiv Chawla 5 years ago

Very valid points, Rajiv Chawla, and thank you for writing in. Wastage as well as the proceeds and benefits of wastage are part of the old industry scam in India.


Raj Khalid

5 years ago

Actually I do not think there is any subsidy. Just find out how much demurage is paid by the State owned oil companies while VLCCs wait to discharge crude, see how much is stolen and "lost". We know that an Maharashtra Govt. officer was burnt by the diesel mafia. We are subsiding Govt inefficieny and losses. If the USA can sell petrol at about one dollar a litre and make a profit why can't we?


5 years ago

OK agreed the culprit is the misuse
by DG sets. But pray why are they
(DG sets) there in the first place. Failure of Government to supply uniterrupted power. The ball is in your court Mr. PM



In Reply to dev 5 years ago

Due to the subsidised price of diesel as well as availability of cheaper stolen diesel, running gensets sometimes cost less than linking up to the grid. Humbly submitted.

But you do have a point, dev, and thank you for writing in.


5 years ago

dear veeresh,

the govt officials are just trying to twist the issues over here. Diesal is NOT SUBSIDISED in india if you count the various taxes taken by central & state govts. In US Petrol which is costlier to make than Diesal ,costs around Rs 42 per lit currently.
Govts do not want to reduce their taxes and just ask the oil companies to share burden. Also final costs of oil etc is higher because of non transparent costs of oil companies.
Rather than simplifying the market, they want to increase taxes on diesal vehicles which is plain cheating


Rajiv Chawla

5 years ago

Diesel subsidy is surely not meant for high-end cars & SUVs. However, govt should NOT introduce differential/ dual pricing system, as it would give additional tool to be misused by many Fuel Station owners and add to corruption and siphoning, as we see in our PDS. The price of diesel should be the same for all.
However, the diesel subsidy can be easily offset by higher Excise Duty on the segment from which govt. wants to withdraw diesel subsidy. Say, an additional Excise Duty of 4% on a diesel car worth Rs. 10 lacs gives Rs.40,000/- upfront extra to the exchequer. This should more than offset the diesel subsidy used by the owner in the lifespan on the vehicle. In any case, many car manufacturers keep prices of Diesel versions a bit higher than Petrol models, while consumers happily pay that bit extra to save money in long run, which incidentally, comes from the subsidy on diesel which is Public money. Extra upfront excise to offset the diesel subsid shall also give consumer a choice whether to opt for one time extra payment to govt. or buy a petrol version.

Damodaran Committee: Experts believe that an internal ombudsman for every bank will not be helpful

They believe that most of the problems customers suffer are due to the unhelpful attitude of banking staff and that putting them in charge will not help

The recommendation by the Damodaran Committee on banking customer services to set up an internal ombudsman system for every bank could complicate the grievances redressal system and increase the time to resolve the issues, according to customers and experts.

Most of the problems that banking customers suffer is largely due to the uncooperative attitude of bank employees. Therefore, experts say, placing the overall authority for the resolution of customer grievances with the banks would hardly be beneficial. If banks were keen to provide good services there would have been no need for an ombudsman system in the first place, they say.

In its report, which was published by the Reserve Bank of India on Wednesday, the committee headed by M Damodaran, former chairman of the Securities and Exchange Board of India, said, "There is a need for the banks in developing their internal grievance redressal mechanism, to ensure only the minimum number of cases get escalated to the Banking Ombudsman (BO) and the scheme is strictly utilised only as an appellate mechanism."

The committee has recommended that every bank should appoint a chief customer service officer (CCSO), not less than the rank of a retired general manager of a scheduled commercial bank and preferably from outside the bank (under the advice of the RBI), who should also have necessary exposure in the working of the operational side of banking. The audit committee of the bank board would oversee the CCSO and the appointed officer should directly report to the bank's chairman, managing director or chief executive (CEO).

This, in other words, means that a person who wants to file a complaint about poor banking services would have to knock on the doors of the bank first, then appeal to the CCSO, and finally to the BO. At present, the customer can directly approach the BO, if he does not receive any satisfactory answer from the bank, or if the lender rejects his complaint.

The committee has recommended that "a person aggrieved with a banking service as hitherto will first complain to the bank, and if within a month does not receive a reply or is unsatisfied with the reply, will appeal to the CCSO of the bank. In view of CBS environment and latest technology available in communication, it is expected that the bank's CCSO would resolve the grievance within 30 days of the receipt of complaint, including the period required for conciliation meeting. On the failure to get a reply within a month from the CCSO, or if unsatisfied with the reply of the CCSO, the complainant can appeal to the BO of the relevant jurisdiction. The decision of the BO shall be final and no further appeal will be allowed."

Industry experts say such a move will only make the redressal mechanism time-consuming for customers. Also, there is not much guarantee that the bank will comply with the recommended rules, as most banks are known for the unhelpful behaviour of the staff towards customers.

If these recommendations are implemented, the role of the BO would be of an Appellate Authority. Those customers who are dissatisfied with the decision of the BO can approach formal institutions like consumer courts, civil courts, while the banks could seek the advice of the customer service department before approaching the courts.

The committee has also suggested amendments to the BO scheme, such as the complaint or appeal made to the BO should be within two years from the date of transaction, as against the current one year.

On the compensation issue, the committee suggested that it should be restricted to the actual loss only, as the BO not being a judicial forum, may not be able to award  compensation  for  any  mental  harassment which cannot be easily computed.

The Damodaran Committee has also recommended that the ombudsman scheme be extended to co-operative banks as well, as they are not covered yet. It also pointed out to the need to educate and make people aware of the ombudsman system through the help of the media.




5 years ago

The fact that a customer has a complaint and he/she would get a fair treatment from the very same bank ,is really not going to happen. Most often the Bank staff in collusion do try to support one of there own at any cost.The fact that a customer would like to get a third party involved preferably a lawyer would be the only way out. The purpose of an external person would only possibly bring out the truth in such a situation. The manner in which a internal would collude would only make things more dangerous for a customer.The fact that bankers are under a scrutiny for INTEGRITY . They should be forthcoming in promoting the trust they need to carry out business in the troubled relation whomsoever is at fault.Finally internal processes are genrally a "eyewash" so let get a makeover on this front pronto ,with no further delay

Reliance Securities launches regular stock purchase plan

According to the company, it has “already enrolled over 6,000 customers in its one-month pilot phase"

Anil Ambani group firm Reliance Securities today launched a systematic investment scheme—Regular Stock Purchase Plan—which allows customers to invest in equity market by making small, regular investments.

The company plans to offer customers a systematic way to invest directly in equity markets at regular intervals.

“Reliance Securities targets to get over 10,000 customers each month, scaling it to over 1 lakh customers in the first year itself. The company has already enrolled over 6,000 customers in its one-month pilot phase,” the brokerage firm said in a statement.

The plan offers two options for investments—amount-based and quantity-based.

“Under the amount-based option, a customer can invest a fixed amount in a desired stock at a set frequency for a selected tenure, while under the quantity-based option, a customer can purchase a fixed quantity of stocks at set frequency for selected tenure,” the statement said.

Reliance Securities ED Vikrant Gugnani said, “Buying regularly helps average out price volatility in the stock market. The plan is aimed to help investors in accumulating wealth by making small, regular investments over a period of time.

“Studies indicate that periodic investments in stocks or mutual funds have delivered far better returns than ad hoc investments done with a view to time the market.”

Mr Gugnani further noted that stock selection or fund selection “plays an important role.”

There is no lock-in period for holding the stocks. Purchased stocks can be sold at any time giving complete liquidity to customers, the statement said. It added that the set frequency could be daily, weekly or monthly and can be stretched over a three-year period.

Also, there are options to invest in stocks as well as ETFs (exchange-traded funds) available in the company’s basket. Reliance Securities currently offers 263 stocks and 17 ETFs in its basket for selection and will add more. There are no charges for enrolling for the plan. A one-time registration is required to activate this facility, which is free.


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