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Old 8th November 2011, 15:28   #91
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

The tax which govt. charges for petrol in North is around 25%-30%, however down South the taxes are way more at 45% approx.

The govt. is fooling people by saying that they have subsidised the fuel cost especially Diesel which is a clear lie on their part.

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Originally Posted by abhibh View Post
That must be in PAK Rs currency (PKR) which comes to INR 49
+1
The information mentioned in website is in PAK Rupee. It has to be converted into INR for exact rate which as you have mentioned comes to 49.
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Old 8th November 2011, 16:42   #92
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Just got this thru FB.

No idea if its genuine.
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Old 8th November 2011, 16:43   #93
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Govt is taxing the fuel after it leaves the refinery. So the fuel companies are suffering losses and are demanding price hikes. There is nothing wrong in that. Are the refineries geared towards producing petrol or diesel in India?

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Old 8th November 2011, 17:28   #94
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Talking Re: Fuel Pricing in India. Detailed Robbery Analysis.

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Originally Posted by Skyline GT-R View Post
Just got this thru FB.

No idea if its genuine.
Excuse me - is making profits a crime? The image quotes profits like its the 7 sins being committed!!!

Anyways - that said, here is the link to the full report - you have time to x-post from FB but not open the IOCL page? LOL.

http://www.iocl.com/download/Audited...ts_2010-11.pdf

What does it sayin the 1st table?
Net sales: 283850 cr
Other operational income: 2493 cr
Costs: 300533 cr
Net loss would have been 14190 cr BUT
Subsidy + grant from GoI : 24281.5 cr
Only then are they making profits i.e without the subsidy burden being shared they run a 14190 cr loss. If the government had not been giving the grants etc, these companies would've all been wiped out 2-3 years back.

Here is another thing to chew on. Its monthly outgo = 25000cr.
its cash on hand (cash + other current assets) is only 3000cr. OR 3.6 days worth of liquid assets in hand (1.8 days of pure cash). Would you run your household or family or business like that? But the government of India does that.

Incredible India we truly are!!

Last edited by phamilyman : 8th November 2011 at 17:29.
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Old 8th November 2011, 17:29   #95
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

In papers today:
Quote:
The losses reported in the quarterly earnings are primarily because they lose Rs 333 crore per day on selling diesel, kerosene and domestic LPG at rates which are way below cost of production.
Oil firms net loss at over Rs 8,000 cr in Q2 - The Economic Times
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Old 8th November 2011, 17:36   #96
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

i have a question (may be dump question)

If petrol is freed deregulated. then it should be sold like other commodities like soap, clothing and stuff what we buy in supermarket or shops . so the tax will be applied is VAT and sales tax on what ever the oil companies sell. But why Govt is fooling us?
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Old 8th November 2011, 17:38   #97
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Did anyone read of the news of double pricing for 2 wheelers and petrol 4 wheelers? i dont know how they are going to implement and control it. At first glance, this news seems as complex to manage as the idea of dual pricing of diesel fuel for private and Commercial users.
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Old 8th November 2011, 17:47   #98
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by phamilyman View Post
Excuse me - is making profits a crime? The image quotes profits like its the 7 sins being committed!!!
It is. For a state owned organization in a regulated (monopolistic) market should be run for the people. Government's job is not to rip people to make profit.

Quote:
Originally Posted by phamilyman View Post
Costs: 300533 cr
Net loss would have been 14190 cr BUT
Subsidy + grant from GoI : 24281.5 cr
Only then are they making profits i.e without the subsidy burden being shared they run a 14190 cr loss. If the government had not been giving the grants etc, these companies would've all been wiped out 2-3 years back.
Not true again. I acknowledge that there are many state owned enterprises that run professionally. However, let us not forget that "Government would save us" mentality allows companies to ignore cost escalations. Take the government out of the equation, then first priority for a professionally run organization would have been to cut cost. Classic example is the way we support Air India/Indian airlines. What a massive wastage of resources

Bottom line is, we are being pushed around in a market that is not fully de-regulated, where customer has no alternative options, where sellers control price.

Can I brew alternate fuel?
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Old 8th November 2011, 19:04   #99
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

My 2 cents:-

1) Yesterday's Economic times carried an article about this whole "under recoveries" concept. From what I could gather from this article, none of the Oil companies are making losses at this point of time and these so called "under recovery" denotes the loss that the oil company would have incurred if they had imported the fuel itself { not crude oil, but finished product such as diesel or petrol} and sold at the current prices. I'm not sure if my understanding is correct, but the notion on under recoveries is more like "probable profit lost" more than "actual loss made".

2) My second point is about private oil companies. Most private oil retailers such as essar, reliance have almost shut shop as they could not compete with the prices of govt companies. The only private oil retailer who operates widely in India is Shell. If you walk in to shell, you will find that petrol is mostly at par with govt oil companies, give or take 2-3 rs. So by the logic that govt is over charging us, shouldnt shell be a lot cheaper? And if indeed govt was overcharging us, wouldnt reliance and essar who also have their own refineries re-opened their retail outlets and charged at least the same prices as govt companies? The only ones who are making unreasonable money in this whole process are state govts who NEVER make an attempt to reduce the taxes that they impose. In Karnataka it is the worst. In hosur, T.N, just 30kms from Bangalore fuel is cheaper by nearly Rs.2! How can we have such disparity between neighbouring states? Can the central govt at least step in and standardize these state govt taxes?
I believe govt oil companies are making money in petrol and are making losses in diesel / kerosene / LPG, but overall they are neither "bleeding" and nor raking in huge profits.
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Old 8th November 2011, 19:32   #100
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

At the cost of repeating myself, which I have done over this and the other fuel thread, there needs to be more transparency in the Pricing mechanism. I am more than willing to pay market prices, but the government seriously needs to address the following for the benefit of public.
  • The tax structure of Petrol needs to be seriously introspected, on the one hand we are the mercy of crude oil prices, while on the other Petrol is taxed much higher than similar fuel products. This is a double whammy.
  • The state tax structure is literally an icing on the cake, the bigger the cake becomes the better the icing. Each hike comes with freebies in the form of added state tax. It is high time the state taxes are done on a Rate per Litre basis instead of percentage
  • Considering the PSU's enjoy near monopoly market conditions I think there has to be a certain threshold profit ceiling, thereby ensuring the OMC's pass the benefits of lower crude prices to public, which has not happened since Jan'09.

Now let me give an analysis for the benefit of all.

This analysis is worked on the basis of a simple assumption. OMC's are not losing any money at the current equilibrium.

Factors taken into account for the analysis

1. Weekly average rates for Brent crude even though the Indian Crude basket is slightly lower in price.

2. Weekly Average rates for USD to INR to nullify fluctuating USD rates

Working backward the cost of crude was generated to INR terms.

For the week ending Oct. 28,11 the average Brent Price was 111.33 USD per barrel. Similarly the average USD rate for the week was 48.94 INR thereby giving us the Per Barrel rate of Rs.5448/-.

As per the OMC's at the retail price of Rs.68.64 they are not losing money hence is assumed as the break even point.

Based on this the average retail prices (Delhi) was estimated taking into account prevailing crude oil prices for the period April '10 to Oct. '11, good year and a half.

It is only during the period Feb. '11 to July '11 the OMC's have actually lost money on account of Petrol. The reason for this the Government did not want to increase the prices until the elections were over for a few states. During this entire period we have not seen even a single paisa reduction on the petrol prices, all the reductions have come from some state government reducing their share of taxes.

It could be a case of compensating for losses elsewhere I am not sure though. But certainly I would feel cheated if I am going to pay for not only my fuel but for the fuel of those SUV's which run on diesel and could afford to pay market rates themselves.

Name:  Average Petrol Prices.jpg
Views: 4978
Size:  101.5 KB

What is the need of the hour is to bring about transparency in the pricing and rationalizing of the tax structure rather than talk of the "Oil companies/Government" making two times money on Petrol.
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Old 8th November 2011, 20:56   #101
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by motorworks View Post
2) My second point is about private oil companies. Most private oil retailers such as essar, reliance have almost shut shop as they could not compete with the prices of govt companies. The only private oil retailer who operates widely in India is Shell. If you walk in to shell, you will find that petrol is mostly at par with govt oil companies, give or take 2-3 rs. So by the logic that govt is over charging us, shouldnt shell be a lot cheaper?
Why would Shell want to do so? Shell is perceived to offer better fuel and has got a consistent service. So, there are people who are buying from them any day. As I mentioned before, there is no alternative for the customer.

Ps: the price difference is a few paise, not 2-3 rs.

Quote:
Originally Posted by motorworks View Post
And if indeed govt was overcharging us, wouldnt reliance and essar who also have their own refineries re-opened their retail outlets and charged at least the same prices as govt companies?
As far as I know, Reliance is supplying the retailers now.
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Old 8th November 2011, 21:44   #102
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by Mik View Post
Keep your cynicism to yourself. Beyond all the Pawars, Yeddurappas and Rajas there are a lot of passionate and honest people in this country who are trying to make it work. If you are interested, go out and check the benefits of NREGA and how it has changed the social fabric in the places it has been used effectively.

If you check out the schemes that have been launched by successive governments, you will be surprised. The problem always has been two things.
1. Implementation - This includes corruption/file pushing/red tape.
2. Resources. Often, the govt runs out of money.

As said in my original post, the public should pressure on the govt to enhances its efficiency.

@Hellmet: 7k a year is not a small amount. But, why won't you pay it. After all, you are paying for a decontrolled item. Also, in India, the movie/cola logic always holds. While a section of the society has the means to enjoy these things at exorbitant rates, a humongous majority of people can never dream of living that kind of life. The govt really needs to work for that section.
The benefits of liberalization has borne fruit for us and we have been huge beneficiaries of it. But, a huge section of India has been left behind.
Can you really blame me for being cynical? Of course the government runs welfare schemes, and it should, and yes, this should be funded by tax collections, but are you implying that the Indian government (Central and state) which levies ridiculously high levels of taxes are doing more for social welfare than other countries that charge lower taxes on petro products? Seriously?

Fact is Indian petroleum products are priced at amongst the highest rates amongst its neighbours, Damn, the governments of Sri Lanka, Bangladesh, Pakistan, Nepal dont do any social welfare and/or their citizens have fantastic tax compliance rates.

Fact is Indian petro cos are being forced to cross subsidize some petro products. Phamilyman very correctly pointed out that without government bonds, some of these cos would make huge losses and running a company with 3 days working capital is plain crazy. However, should'nt the solution be to have a more transparent pricing methodology, why have this wierd situation that the oil cos have to subsidize their products, and the govt which levies ridiculous taxes then cross subsidizes these very cos. Am I the only one who thinks this is very convoluted?

As someone else pointed out in this thread, the cost of petrol was cheaper when crude was at $130 a barrel than today when its $110 a barrel or even lower. Is'nt this wierd? How does one explain that? Oh yeah, our great benevolent government and its amazing welfare schemes.
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Old 8th November 2011, 23:48   #103
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Hi everybody
Motorworks has mentioned a rs 2 difference between Karnataka and TN.
Before the current hike the prices I paid
19/8/2011 Jalalabad (Punjab) rs 70.92
09/9/2011 Lakhanpur(J&K) rs.66.92
12/9/2011 Nainikhud (H.P.) rs.65.93
A difference of rs 5 between Punjab and H.P
Regards
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Old 9th November 2011, 05:52   #104
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Talking Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by WhiteKnight View Post
It is. For a state owned organization in a regulated (monopolistic) market should be run for the people. Government's job is not to rip people to make profit.
I don't know where you got these antiquated pseudo-socialist thoughts but if a company does not make profits, it does not survive. Even monopolistic markets are allowed profits, in case you were unaware - http://www.iglonline.net/Documents/F...t_30052011.pdf

IGL made a PAT of 69cr on a topline of 566 cr. 12% profit margin!!

Of course, profits have to be reasonable. Considering a very high % of transportation fuel consumed in India is for individual discretionary use (yes, we can all leave our individual cars/bikes and commute by buses - so its not as essential a business as FCI imho) - even by your logic they deserve profits.

And what profits, may I ask? 7830cr on a topline of 314710 cr i.e 2.5%?

Which includes profits from refining and upstream oil & gas - so if we actually dug through the numbers, there's a high chance that the oil marketing business already makes much lesser profits!!

Quote:
Originally Posted by WhiteKnight View Post
Not true again. I acknowledge that there are many state owned enterprises that run professionally. However, let us not forget that "Government would save us" mentality allows companies to ignore cost escalations. Take the government out of the equation, then first priority for a professionally run organization would have been to cut cost. Classic example is the way we support Air India/Indian airlines. What a massive wastage of resources

Bottom line is, we are being pushed around in a market that is not fully de-regulated, where customer has no alternative options, where sellers control price.

Can I brew alternate fuel?
Again rhetoric and incorrect data. Air India's example is NOT relevant. Its very easy to say words like that highlighted in bold above. Please dig through their financials/annual reports and give me 3 facts which support your hypothesis. In fact - let's start with one fact like that.

While you dig that out, let me bust that myth further:
Video: Indian Oil losing Rs 140 cr per day on under-recoveries - NDTV Profit - 140cr/day under recoveries or 60000cr/day (that was August - INR has depreciated 10% since then)
The only costs in their hand (employees and "other expenditure") total 23503 cr. I am now even more mystified as to how they can cut all these costs to wipe out the under recoveries?

Let's take your "monopoly is evil and must not make profit" argument further - a monopoly is not allowed to recover its investments either. So let's deny them depreciation as a cost as well - that takes the costs in IOCL's hand to 28434cr. So basically, if they were to fire their employees, stop operations completely and not even claim depreciation - even then, half the under-recoveries cannot be bridged. So please help me understand the source of your assertion.

Secondly, every newspaper (not all of them are pro govt!), everyone is shouting from the rooftops that the petrol prices are fixed for zero-under-recoveries (there are exact formulas available - no arbitrariness as your italicized text above indicates) and diesel price includes a significant under-recovery and still you claim that "sellers control price". We need to move on from our habit of assuming that the folks in govt or govt cos are a bunch of dithering idiots and we on the internet know-it-all.

Let me give you my last thought on this - which aaagoswami mentioned as well. Since you say professional private organizations will do things differently - let's name those in the oil retailing business:
  1. Reliance? They SHUT SHOP almost 5-6 years back. Tell me one business in their history that they exited wholesale and in such a short time.
  2. Shell? They sell fuel at "Shell" prices and even us BHPians often fill up from "trusted" govt pumps than pay the "Shell premium"
So your thesis that customers are being pushed around in a market where sellers set price is unfounded. The only ones making money in this market are the governments, and of late, its the state governments who are laughing their way to the banks. My posts on page 5 (Fuel Pricing in India. Detailed Robbery Analysis.) can illustrate it.

and now, time for some more mythbusting - let's shed some selective amnesia:
Quote:
Originally Posted by Lalvaz View Post
As someone else pointed out in this thread, the cost of petrol was cheaper when crude was at $130 a barrel than today when its $110 a barrel or even lower. Is'nt this wierd? How does one explain that? Oh yeah, our great benevolent government and its amazing welfare schemes.
Quote:
Originally Posted by antz.bin View Post
I see you are a fellow P220er. When I bought mine, I tanked it up for the first time for 48 bucks a liter @Shell (PSU was 46 bucks a liter) on 7th August 2009. The crude prices at the time were hovering around $130-$140/barrel.

If we check prices now, We pay Rs.74.xx here in Pune (You guys don't since you guys are in Delhi/NCR). This price is at a time when Crude prices are at a much more moderate (in comparison) level of $110/barrel.
I see your points and raise you this data point (yes I know we all understand why the govt did it):
http://www.team-bhp.com/forum/indian...tml#post851015
Quote:
yesterday my friend was telling that it costed above 68 @ shell near kundalahalli gate.
Considering that the crude would've been bought a month before and then refined and sold (often companies buy 1 month in advance) - look at the May 2008 beginning rates of crude: $110-120. What does bloomberg say for current Brent prices: $115. Factor in the current exchange rate and you get the mid70s rates we are seeing today. Back then, only shell had those rates, not the sarkari pumps as you both have mentioned. But the shell pump rates reflected the true price of the fuel. So to say how the price has gone up is incorrect - its more that under-recoveries/subsidies on petrol have been eliminated.

PS: Yes I hate this situation and the price rise it brings - I'm just constantly trying to drill some facts and rationality into the discussion, nothing else.
PPS: before someone says what about WTI Cushing prices? Ignore them, says Forbes.

Last edited by phamilyman : 9th November 2011 at 06:15.
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Old 9th November 2011, 11:59   #105
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

@phamilyman - excellent analysis, friend .

Yes, the situation is not enjoyable, but your points are indeed rational. But the political situation seems getting more and more rhetorical and soon we are likely to see everyone crying for statusquo. Bliss for diesel users like me.

Still, my vote is for
  • free pricing to bring in competion and cost savings
  • Reduction in petrol taxes to bring it to a much lower premium to diesel
  • Meaningful support for all public carriers and Below Poverty Line LPG and kerosine users, immediately to be implemented as diesel, LPG and kerosine prices move up.
End of the day, however the Govt. dislikes it, they will have to take some revenue hit on the taxes front as long as crude rules this high.

And as much as we dislike Pakistan, got to concede their pricing mechanism seems a lot better and equitable.

Last edited by CoolFire : 9th November 2011 at 12:03.
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