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Old 7th November 2011, 01:57   #16
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

antz.bin, your post is very informative. However, I am afraid its a bit simplified. Crude Oil it self comes in various qualities, sweet, sour (based on Sulfur content), heavy, light etc. What we get in Bombay High & most of our imports are sour crude oil (if what I studied in my engineering still holds true). So it takes a bit more refining and the product composition would vary from what you have mentioned. Add to that the fact that depreciation of our refining equipments (distillation column etc) would be higher due to the higher sulfur content of the crude. Also, I believe that the entire chain i.e. crude oil to finished product would not be as efficient as US because of aging equipment, nature of crude, losses in storage and transport and due to "babugiri" in all our Petroleum firms in general, all these would drive up costs.

However, having said all this, I believe the petrol price in India is still bit of mystery. An RTI is definitely the need of the hour!
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Old 7th November 2011, 02:00   #17
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

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Originally Posted by vishnurp99 View Post
The initial post was very informative but it seems to be neglecting the huge capital cost which would have been incurred for setting up the refineries/paying salaries and other infrastructure to process the crude oil and then store it. The money for that has to come from the profits of selling petrol.

Also thanks to our great black economy(some say it's bigger than our white economy) taxing fuel is one of the few options that the govt has to get some decent amount of money.
I am no expert in running a company but I think a profit of 14.5K Crore profit a month selling just petrol and diesel (as mentioned in the 1st post) is enough to pay the salary and then some!

The Govt. failure to tackle the black economy is just no justification for the situation with the fuel prices today. Substituting 1 with the other is not done. Its like saying 'I have no money to buy a Merc so I'll buy a Nano and fit it with Merc tyres!' Its high time the Govt. gets it act right.
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Old 7th November 2011, 02:22   #18
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

it's not just the salaries but the capital which was required to initially set up the refineries. It will be interesting to know what % of the govt's total income comes from taxes on fuel. I am prepared to bet that it's going to be a substantial % something in the range of say 40%.

By the way black economy and the huge tax on fuel is linked. Since most of the money transactions in real estate etc are black the govt looses it's cut from all these major transactions. The only people who pay proper taxes on income are the people like IT professionals/Bank folks etc.Even these guys(IT and all) try to save taxes in real estate deals. Since most of the big money is black the govt has to tax consumption and fuel is something that everybody consumes. The rich consume more fuel. So the tax on fuel is the easy way out.

Fixing the black economy is easier said than done since everybody has a piece in the pie. I can't think of a fix in the near term unless you change the taxation structure or india becomes a dictatorship.
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Old 7th November 2011, 05:46   #19
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

This is an awesome analysis, all this talk of government for the common man is down the drain. As rightly said in the title its a daylight robbery.

One thing i fail to understand, this has been going on for ages and we have had 2-3 changes in the government and none have done anything. So by that yardstick folks who are opposing are also to be blamed as to why they did not do it when they were in power.
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Old 7th November 2011, 09:25   #20
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

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Originally Posted by antz.bin View Post
These %ages are not good in Indian Context. You to have to visit Petroleum minsitry's website to know that more than 45% output of crude oil in India is Diesel and only 15% is Motor Spirit or Petrol/Gasoline. I will post the link very soon.
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Old 7th November 2011, 09:29   #21
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

If I understand correctly the PSU purpose is not profit motive and its priority is a service and employment generation. So I feel that the prices have to be planned keeping it in Mind and not give the lame excuse like the OIL PSUs are running in loss. The Govt doesnt mind spending 1000s of crores from tax payers money for AIR India which is running in loss year on year and dont think of any practical solution think those are the types of loss which they need to cut. Its my personal view correct me if I am wrong.
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Old 7th November 2011, 09:32   #22
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

@sumithb The post #1 was just a 'back of the envelope' calculation. We are constantly fed that 90% of all our crude requirements have to be imported. So, consider this calculation to be just the 'import' component of the crude sold. That has to be same as the crude sold to US. As for the maintenance cost of refineries, I would like you to know that the refineries in India are not owned by PSU companies. They are owned, managed and operated by Reliance Petroleum. Private companies are not affected by babudom and know how to maximize their profits. And still 0.6 and 0.8 Rs. per liter is still a very big cost just for refining. These refineries have broken-even decades back.

The crude produced at Bombay High does not have to be bought at market rates since it is property of the Govt. of India. The major cost here is not of equipment but of exploration. This comes out an order of magnitude cheaper than importing crude and thats the only reason we use it. As an example, countries where they use their own domestic crude 100%, the fuel prices are as follows.

Venezuela : INR 1.82/liter
Kuwait : INR 12.15/liter
Saudi Arabia : INR 11.02/liter
Egypt : INR 8.33/liter

Since all these countries make their own crude oil, it is easy for them to price it cheaper for their own people. India makes up 10% of all its crude oil requirements through domestic crude. So, it is common wisdom that this crude will be substantially cheaper than the imported crude but this is still sold at pump prices to all of India leading to Astronomical profits.

There is not much to calculate here and most figures are provided in supporting links. We can waste more time in refining this calculation (which in effect will show more profits) OR we can do something about it. As SpikeArrestor said, an RTI would be a good way to start off things.
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Old 7th November 2011, 10:12   #23
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Thank you for posting this,have been searching something like this on the net because i just cant get my head around how oil prices works,from wells to pumps.

Sorry if i sound like noob here,but trying to understand things.

If the OMCs get Rs 63.56/L,then how much of it do they get after paying all the taxes?And what is the tax breakup of this price?We constantly here about how each state levies its own taxes,and also centre has its own taxes,and its because of these taxes that OMCs in the end cant recover their cost,and thats were the "under-recoveries" come in.

This might sound even more stupid,but lets take an example of reliance.Reliance imports the crude and refines them.Since reliance is a private entity they cost of petrol should not be more than the refined price of petrol,octroi,dealer commission and transportation cost.Add around Rs5-6 as a profit margin from reliance,and they can sell petrol for i think Rs 45-50 from their own pumps?
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Old 7th November 2011, 10:19   #24
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

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Originally Posted by avishar View Post
Thank you for posting this,have been searching something like this on the net because i just cant get my head around how oil prices works,from wells to pumps.

Sorry if i sound like noob here,but trying to understand things.

If the OMCs get Rs 63.56/L,then how much of it do they get after paying all the taxes?And what is the tax breakup of this price?We constantly here about how each state levies its own taxes,and also centre has its own taxes,and its because of these taxes that OMCs in the end cant recover their cost,and thats were the "under-recoveries" come in.

This might sound even more stupid,but lets take an example of reliance.Reliance imports the crude and refines them.Since reliance is a private entity they cost of petrol should not be more than the refined price of petrol,octroi,dealer commission and transportation cost.Add around Rs5-6 as a profit margin from reliance,and they can sell petrol for i think Rs 45-50 from their own pumps?
Doe it matter how much the OMC gets? Aren't they all state owned? You sell something worth 10 rupees for 20 bucks. You keep 10 bucks in your left pocket and the other 10 bucks in your right pocket. Does it matter which pocket got how much? You still got 20 bucks at the end of the day.
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Old 7th November 2011, 10:35   #25
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

First of all very nice report.

Secondly, even after we take into account the taxes, which any way is going to the government, the companies make a cool profit.

All said and done most NEWS channels have been highlighting this, all analysis have been done, but at the end of the day no action has come from all this. We have to make sure that this translates to action, unless that happens we have no means to escape this.

Safest bet is to tax middle class and all things he needs, food, fuel, home etc. First income tax then whatever is left charge service tax on everything under some pretext.

As someone rightly said When i refuel my motorcycle, I'm paying for fuel subsidy for a guys in SUV.

BTW, This could be a perfect diversionary tactic as employed always by the government. Now with so much blatant corruption and general public calling for action and accountablity, the perfect way is to make general living expenses so difficult that person has no choice to let go of the cause.

If my entire effort is to get into a 07:49 a.m fast local then i've no energy left for any other activity.
Cheers!!

Last edited by mkpiyengar : 7th November 2011 at 10:39. Reason: adding few more lines.
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Old 7th November 2011, 10:39   #26
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

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Originally Posted by antz.bin View Post
So, By selling just the Petrol and Diesel in this imported crude, Govt. made a cool 1,45,02,33,50,000/- (14,502 crores in one month) had it been bought for $100/barrel.
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Originally Posted by mkpiyengar View Post
As someone rightly said When i refuel my motorcycle, I'm paying for fuel subsidy for a guys in SUV.
Few weeks back (before price increase), Minister of State for Petroleum and Natural Gas R P N Singh had shared some figures:

Without taxes, petrol would cost Rs 23.37 per litre (Delhi)
With taxes it is Rs 63.70 a litre (Delhi)
In US, the petrol price is Rs 42.82 per litre

Without taxes, diesel would cost Rs 24.90 a litre. (Delhi)
With taxes the price is Rs 41.29 per litre, (Delhi)
In US, diesel is priced at Rs 45.84 a litre

PS: Price compared with US just for reference in a unregulated market and price of diesel seems close.

He also says the current price of diesel in Delhi is Rs 4.97 a litre below its actual cost.
This means Rs 4.97 is some kind of subsidy or un-levied tax on diesel, while Rs 19 (~63-44) is the penalty or extra tax on petrol.

Source:
Petrol in India costlier than US, Pakistan: R P N Singh - Economic Times
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Old 7th November 2011, 10:53   #27
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

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Originally Posted by msdivy View Post
Without taxes, petrol would cost Rs 23.37 per litre (Delhi)
With taxes it is Rs 63.70 a litre (Delhi)
In US, the petrol price is Rs 42.82 per litre

Without taxes, diesel would cost Rs 24.90 a litre. (Delhi)
With taxes the price is Rs 41.29 per litre, (Delhi)
In US, diesel is priced at Rs 45.84 a litre
Even by this estimates, the difference of Rs. 40.33 for Petrol and Rs.15(approx) as taxes

So if at all there is subsidy it is in taxes levied on diesel and not the cost.
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Old 7th November 2011, 11:18   #28
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

The chart from Now, it's cheaper to fuel planes than cars shows the whopping amount of taxes applicable in petrol sales , as of May , 2011.

The govt makes a good amount of money of what people do in day-to-day life - private transportation being one of them.

Last edited by sdp1975 : 7th November 2011 at 11:19.
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Old 7th November 2011, 11:40   #29
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Good that some one else also thinks like me. There is seriously a scam going on in the Petrol Pricing. A couple of posts which I had made in the other thread on Fuel Price.

http://www.team-bhp.com/forum/indian...ml#post2547478

http://www.team-bhp.com/forum/indian...ml#post2565301

But there are a couple of flaws in the OP's argument.

1. The Indian Crude Basket is linked to the Brent Crude which is hovering around 110 USD and not 93.39 USD as assumed. In my post above I have given details of the crude prices in INR terms from May'11 which I am constantly updating, if you see the current prices it is certainly higher than earlier.

2. Though its all fine to say that the Government collects all the money whether they are in the form of taxes or as petrol prices, there is a huge difference, it is like saying why don't we fuel Diesel in our cars since they both come from the same source "Crude Oil".

The Refinery Gate Price of Petrol is Rs.41.64 at Delhi, Central Tax is Rs.14.78 and state taxes is Rs.11.44.

The Hindu : Business / Economy :

My issue with the Petrol Pricing is there is no transparency on what is the break even point for the OMC's in terms of "Crude Oil Prices in INR". The government does not seem to come out with that. The reason for that I feel is the government at times offsets the increased margin they get with lower crude oil rates to offset under recoveries in Diesel etc.
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Old 7th November 2011, 11:50   #30
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If we aren't ready to pay appox Rs 75 for the cost of petrol, let's get ready to pay income tax @ 50 percent or higher. After all govt needs to fund all it's newly launched schemes (nrega etc). Don't want to debate the effectiveness of these schemes in this thread.

With higher fuel prices the burden of these politically correct schemes is borne by all people not just by the population paying tax .
I would prefer higher fuel prices to higher IT any day. At least I have a control on how much fuel I consume......
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