Fuel price fluctuation tracker thread

[randomGuy]

Two questions I have been asking and you have not given me any answer: 1. Where will the govt find funding for all these? 2. How'd do you identify precisely the target population earning less than 60K per annum? And given most of these are in the most rural areas, how'd you ensure last mile connectivity to such groceries and ensure all infrastructure including storage, transportation etc? Most importantly, how'd you determine what is exactly important for them? Or are you saying its just milk that they need through this scheme?

I guess I have - For now, oil price drop funds this almost totally. Oil prices wont go to $100 in foreseeable future. It may go to $70 ( in long term) and even then we will save (but not as much as now). In addition, we can scrap mnrega and identify other subsidies to be scrapped. We can ask for PAN number (as that is linked to Bank a/c and IT returns) while giving the coupons. I purposefully did not mention it as poor people do not have PAN card. I like said, ad campaign is a solution that can minimize usage by people who are not entitled. Will have to make these counters like mother dairy, reliance fresh etc in towns, larger villages atleast if not in small villages. (btw Mother dairy is a small shop only, nothing fancy abt it) To your last question - Milk plus all other eatable stuff. Though i see the program increase the consumption of milk and milk products among poor which is one of the main aims.

[Precambrian]

I guess I have - For now, oil price drop funds this almost totally. Oil prices wont go to $100 in foreseeable future. It may go to $70 ( in long term) and even then we will save (but not as much as now). In addition, we can scrap mnrega and identify other subsidies to be scrapped.

[randomGuy]

can you quantify the "savings" when oil is at USD 70 per barrell? How'd you compute these savings?

Trade deficit was down from $16B to $9B from Nov.14 to Dec14. India's fuel import is probably worth $150B-$200B per year. "According to CARE Ratings Chief Economist Madan Sabanavis, with every $10-a-barrel fall in crude oil prices, the country's annual oil import bill will come down by $16-17 billion." http://www.rediff.com/business/report/fall-in-crude-price-to-lower-indias-import-bill/20141003.htm You can get an idea from the above.

I dont' understand, you are saying absence of PAN card is a good indicator?

Nope.It makes the job harder which is why we will rely on ad campaigns.

So that's additional cost. Who's going to bear that? How would reliance agree to open their shops in areas where they have otherwise little market for their stuff?

theres govt. mother dairy and safal(vegetable) stores. Let Rel. , big bazar make their decision on business viability

What are these "all other eatable stuff" you are talking about? I do not think milk is a scarce commodity in India in any case.

All stuff including bread, flour, lentils, rice..

How'd you determine what's necessary for a household earning less than 60K per year?

Sounds a rhetorical ques. anyways, read earlier posts on mindset of many poor people

[Precambrian]

Trade deficit was down from $16B to $9B from Nov.14 to Dec14. India's fuel import is probably worth $150B-$200B per year. "According to CARE Ratings Chief Economist Madan Sabanavis, with every $10-a-barrel fall in crude oil prices, the country's annual oil import bill will come down by $16-17 billion." http://www.rediff.com/business/report/fall-in-crude-price-to-lower-indias-import-bill/20141003.htm You can get an idea from the above.

Yes, I know that the country benefits from a fall in oil prices, but if you noted, we are still running a huge trade deficit. If we decide to plough funds out of this, then the trade deficit is going back to terrible levels of 5-6% or even above. How're you going to address that?

Nope.It makes the job harder which is why we will rely on ad campaigns.

Ad campaigns need money. Besides, how do you think ad campaigns alone can bring about fundamental change int he way people live?

theres govt. mother dairy and safal(vegetable) stores. Let Rel. , big bazar make their decision on business viability

Every enterprise needs to take decisions based on economic viability. Otherwise the burden on the exchequer is only going to go up. Do you want to paralyze the economy in the hunt for some utopian ideal?

All stuff including bread, flour, lentils, rice..

Existing PDS systems already address this. Besides, how many poor people eat bread? I know they prefer roti in north India and rice gruel in south india. How'd you impose your arbitrary food choices on them? More importantly, we come back to same issue of absence of infrastructure especially in far off regions to store perishable item like bread.

Sounds a rhetorical ques. anyways, read earlier posts on mindset of many poor people

Very sadly I must say your replies are getting vaguer and vaguer with each iteration. You're mentioning the same thing - but without addressing the most key aspect of it, funding. If I had unlimited funds, then the whole nation would be a heaven. Unfortunately we don't have funds and in absence of targeted, precisely tailored schemes, it's a recipe for national disaster.

[randomGuy]

^ On 1st Jan-2014, Brent Crude was $108 per barrel. On 19th June it was $115. No one knew at that time that the oil will drop to $46 today. At that time too, India was running trade deficit. Foreign investments were coming at that time too, Currency was stable at that time too. But you keep coming back repeatedly where will the money come from. That is absurd. There are many sound countries in the world which run trade deficit and give subsidies to their people. (btw the trade deficit could further shrink as India was using the previously stored crude bought at higher price) I have shared an estimate above which says India will save $16 billion per year for every $10 drop. For $60 drop, the saving could be 6*16=$96 billion per year or $8 billion per month. We had stored oil bought at higher price Think about a construction worker working in govt. project like making flyover or laying underground pipes. I have tried to share their mindset above and the purpose of this program which you seem to be not appreciating -

many times the poor have limited money but enough money to spend on quality nutritious food but they dont spend or hesitate to spend money on quality nutritious food (like milk etc). Coupons will only be for eatable items, so the poor will be forced to use them or else they will lapse. : : The idea is that people think they have an assurance of their food security and that they are not working for food but for other stuff like buying a house, car, holiday travel etc....that even if they are unemployed, at least they will have coupons worth 700/- for eatable items. They might not ever avail the coupons but the confidence, the assurance levels will go up hence so will the quality of life. Poor people dont drink enough milk on average and this will help increase milk consumption n nutrition among poor.

[Precambrian]

^ On 1st Jan-2014, Brent Crude was $108 per barrel. On 19th June it was $115. No one knew at that time that the oil will drop to $46 today. At that time too, India was running trade deficit. Foreign investments were coming at that time too, Currency was stable at that time too. But you keep coming back repeatedly where will the money come from. That is absurd. There are many sound countries in the world which run trade deficit and give subsidies to their people. (btw the trade deficit could further shrink as India was using the previously stored crude bought at higher price) I have shared an estimate above which says India will save $16 billion per year for every $10 drop. For $60 drop, the saving could be 6*16=$96 billion per year or $8 billion per month. We had stored oil bought at higher price Think about a construction worker working in govt. project like making flyover or laying underground pipes. I have tried to share their mindset above and the purpose of this program which you seem to be not appreciating -

Sir, economics 101. Those are savings but as long as the trade deficit exists, it's merely a reduction in net deficit. Let me tell u with an example. You are the head of a family. Your income is 1000 per month. Your expenses are 1100, and hence you're forced to borrow the additional 100 needed from your near and dear. Remember that you have to pay this back, and the interest is mounting every month. Due to petrol price coming down, your cost of living suddenly comes down to 1050 per month. Without doubt the 50 bucks is a savings from your point of view. But the question is, would you use that extra 50 to pay back or would u spend that 50 for other expenses? Now replace you with Indian govt. And you get the idea

[randomGuy]

^ if we go ahead with this program, the fiscal deficit will remain the same. Most economists are fine with 4% fiscal deficit. The trade deficit will obviously reduce as import bill will reduce due to low oil price.. And this is desirable. Govt. subsidy on fuel will reduce. You are overcomplicating a simple issue of providing food coupons to poor people which won't affect inflation or fiscal deficit. This is a disadvantage of being cynical of any idea of any kind of social spending.

[Precambrian]

^ if we go ahead with this program' date=' the fiscal deficit will remain the same. [b']Most economists are fine with 4% fiscal deficit. The trade deficit will obviously reduce as import bill will reduce due to low oil price.. And this is desirable. Govt. subsidy on fuel will reduce. You are overcomplicating a simple issue of providing food coupons to poor people which won't affect inflation or fiscal deficit. This is a disadvantage of being cynical of any idea of any kind of social spending.

Come again? When did we achieve 4 pc fiscal deficit? Even after all these "savings" on account of the sharp fall in fuel prices, govt is hoping that it would be able to meet 4.1% target at the end of this fiscal year. It was 5.3% about a year back, when oil prices were still on the higher side. Should the govt implement your idea, the fiscal deficit will be scaling those levels, and touching even 6%. I don't understand what I am over complicating here. I am merely asking you to list sources of finance for the govt to fund your overtly simple idea.

[randomGuy]

Come again? When did we achieve 4 pc fiscal deficit? Even after all these "savings" on account of the sharp fall in fuel prices' date=' govt is [b']hoping that it would be able to meet 4.1% target at the end of this fiscal year. It was 5.3% about a year back, when oil prices were still on the higher side. Should the govt implement your idea, the fiscal deficit will be scaling those levels, and touching even 6%. I don't understand what I am over complicating here. I am merely asking you to list sources of finance for the govt to fund your overtly simple idea.

Correct. The govt. is actually aiming at hitting 3%, 2% or lower for the future. Diff. govt. have diff. perspectives. But I was telling you that it is OK to have a fiscal deficit.it is never the case that if you have the slightest of deficits, tht you can't give subsidies . Govt had aimed for 4.2% in July budget when oil prices were still up. Part of the plan was to mine coal n iron ore in India and not import them. Govt. will save on fuel subsidies n that money would be used to fund the coupon programme

[Precambrian]

Correct. The govt. is actually aiming at hitting 3%, 2% or lower for the future. Diff. govt. have diff. perspectives. But I was telling you that it is OK to have a fiscal deficit.it is never the case that if you have the slightest of deficits, tht you can't give subsidies . Govt had aimed for 4.2% in July budget when oil prices were still up. Part of the plan was to mine coal n iron ore in India and not import them. Govt. will save on fuel subsidies n that money would be used to fund the coupon programme

I don't think 5-6% qualify as "slight deficits".

[randomGuy]

I don't think 5-6% qualify as "slight deficits".

4.2% was attainable as per jaitleys July budget even without oil price drop. (Through Domestic coal n iron mining, reducing wasteful expenditures like mnrega etc) Oil price drop has come latter, the benefit of which I am asking for to be used for this coupons programme

[Precambrian]

4.2% was attainable as per jaitleys July budget even without oil price drop. (Through Domestic coal n iron mining, reducing wasteful expenditures like mnrega etc) Oil price drop has come latter, the benefit of which I am asking for to be used for this coupons programme

That is what is called projections. Despite the oil drop, target deficit had already been reached by November - with around 4-5 months still to go! Check for yourselves how many times in the past we achieved what we budgeted in terms of fiscal deficit! Also, our accumulated public debt is 66% of our GDP. Any surplus we get needs to go remediating these debts!

[randomGuy]

That is what is called projections. Despite the oil drop, target deficit had already been reached by November - with around 4-5 months still to go! Check for yourselves how many times in the past we achieved what we budgeted in terms of fiscal deficit! Also, our accumulated public debt is 66% of our GDP. Any surplus we get needs to go remediating these debts!

Projection are not hollow. If not for oil price drop , govt. Would have had to work at a faster pace but the target would have been met. Many countries are running more than 66%. Its normal. Its a long term debt. These days the liquidity is abundant n the interest rate not high.

[Kalia_Test]

Randomguy is proposing foodstamps - a welfare scheme that even US does so its nothing new. There are many other such welfare schemes that can be done. Whether India has money to do or not is a different issue altogether ( We should never introduce a welfare scheme intended to be long term in nature based on the price of a commodity that we are importers of IMO ). However, there are many arguments pro and against it. Some studies show that food stamps directly in the hands of the poor will ensure that people use it just for that purpose and it will act as a stimulus to economy ( rather than going to rich who tend to hoard ). Whether India has such a mechanism that can ensure only the expected people are beneficiaries is open for debate. Foodstamps can be used to improve nutrition of a nation for e.g by making eggs and protein rich food cheaper than pure carbs,etc. In the same vein, there are arguments that foodstamps don't work. In my opinion, we in India have a lot to do in terms of improving infrastructure, improving crop yields in the supply-logistics side. IMO, any money should be used first to improve and smoothen supply. Only when it is optimized to a good degree where incremental investments don't justify incremental benefits should we look at welfare and stuff. Currently a well established cold-storage mechanism across the nation will be lot more beneficial to reduce wastage of perishables than any foodstamp program. Interesting topic though and some good links below :- http://www.theatlantic.com/health/archive/2012/07/the-economic-case-for-food-stamps/260015/ http://wallstcheatsheet.com/politics/food-stamp-cuts-good-for-u-s-budget-bad-for-families-and-business.html/?a=viewall http://prospect.org/article/five-reasons-food-stamps-work-just-fine http://www.thenation.com/blog/176289/gops-no-good-very-bad-food-stamp-cuts

[randomGuy]

^interesting. Ya, food coupons seem like a natural option to analyze due to the obvious advantages. So no surprise that it has been tried in other countries too (hadn't read abt it though, its an idea I had among a couple others) Nice discussion here. Thanks precambrian tiger kalia s=g

[Sachin=GOD]

The late RK Laxman on Fuel Price hikes: :hatsoff:

[Clarke]

Achche din for airlines and jet setters, humein to excise bharna padta hai :/ At least for the sake of not showing up as outright elitists, they shouldn't have allowed high octane ATF to cost less than petrol/diesel.

[Sachin=GOD]

Achche din for airlines and jet setters, humein to excise bharna padta hai :/ At least for the sake of not showing up as outright elitists, they shouldn't have allowed high octane ATF to cost less than petrol/diesel.

ATF prices were extremely high in India and formed more than 40% of the operating costs - that was the highest among all major countries. So the reductions that have been done since August last year were much needed and will save some costs for the Airlines, many of which are running in heavy losses.

[Precambrian]

LPG was reduced by 100 Rs as well per cylinder - that's like 15% cut.

[Malcolm Merlyn]

No more cuts expected i guess.