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Old 9th November 2011, 16:26   #121
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Below table shows the break-up of taxes, excise duties, cess and other levies on petrol prices in Delhi, India. It also shows how diesel is so affordable (relatively) at at price of Rs. 41.29 in Delhi while the petrol more like an elitist fuel in India.

Fuel Pricing in India. Detailed Robbery Analysis.-fuel.jpg

Cheers!
Irish

Last edited by Irish : 9th November 2011 at 16:28.
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Old 9th November 2011, 16:58   #122
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Antz according to me we are all being taken for a big ride in Petroleum pricing in India. We should have a white paper on the costing of petroleum products in India maybe some RTI activist will be able to eventually procure it or a retired finance man from one of the PSU might reveal the cat out of the bag. Domestic production of crude is approximately 45 million barrels and imports are approximately 100 millions barrels. The domestic consumption is pegged at 110 million barrels with inventories pegged at 35 million tonnes.

So the domestic production is approximately 41% and imports contribute 59%. The average costing has to be taken to arrive at Petroluem costing which is right way of calculating the Petroleum prices. It is here we are given the funda of under recovery, subsidy etc. In gas production, India produces almost 95% of its requirement with only 5% imports. There is a huge profit on Gas sales at current prices in India.

It is good that PSU's are making huge profits, which is obviously transferred into budget account whenever govt. falls short of its revenue targets through dividends etc. However it is not good to do so without transparency. Thankfully there are no scams unearthed so far in this sector.

My only contention on this issue was to have uniform pricing across India. When we claim to be one country, majority of the products and services are being sold with one price across the country, it is because taxes are nuetralised by companies and retailed across India. This phenomenon was started by Hindustan Levers in early 90s and other FMCG companies and later by white goods companies. The basic logic being wide fluctuation of taxes ranging from 0 to 22% in states. Goods used to be smuggled from 0% tax states to 22% tax states causing revenue loss to the state govts, and wastage of sales infrastructure set up in higher taxed state, who used to complain that goods were infiltrating into their state from neighbouring state. Even now Finance ministry is trying hard to introduce GST which will be uniform tax concept across the country after 2 decades since private cos have already implemented the same. There is some resistance from states but eventually it will accepted with the present sales tax structure freezed.

If some clever ruling govt wants manipulate the public they can do so before the election code comes into force reduce taxes on petroleum 3 months prior to election. Just imagine the scenario if Karnataka govt reduces the tax on petrol from current 28% to 8% . The price of petrol will drop by Rs 15/. The public with short memory may end up voting the ruling party. Adulteration is another issue that PSU's and public will have to grapple with if the current scenario of Petrol and Diesel prices widen. There is almost Rs 30 diff in prices of Petrol and Diesel as per figure quoted by Irish Above.


Uniformity in Petroleum Pricing will signal we as citizens are not discriminated upon whether we reside in Kashmir or Kanyakumari I

Last edited by ukderebail : 9th November 2011 at 17:09. Reason: grammer
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Old 9th November 2011, 17:06   #123
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by Irish View Post
Below table shows the break-up of taxes, excise duties, cess and other levies on petrol prices in Delhi, India. It also shows how diesel is so affordable (relatively) at at price of Rs. 41.29 in Delhi while the petrol more like an elitist fuel in India.

Irish
Nice detailed table on Petrol products pricing in Delhi. The table reveals that there is almost Rs 30 difference in prices of petrol and diesel. I hope there is a strict vigil on adulteration in Delhi
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Old 9th November 2011, 17:13   #124
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Not sure if the following link giving authentic breakup has been shared earlier by someone

Press Information Bureau English Releases

The petroleum minister has furnished breakup of petrol and diesel prices as well as the financial support to PSU OMCs. The details are as on 02-Aug-2011 and give a good idea about various cost components, under-recovery, various taxes & duties etc.
__________________________________________________ ________________

Free market pricing, that would also enable the private sector to fully participate, along with rationalization of differential duty structures, is the solution to the ills afflicting the sector.

But the perceived populism demand is not letting the government bite the bullet.

Who's at fault? Government or us? A large part of the blame must be taken by we the people - collectively.

And let no one say that the taxes on fuels need to be eliminated altogether. Country's finances need managing too.
__________________________________________________ __________________

Quote:
Originally Posted by Fordmanchau View Post
...I was hoping that Shell being Pvt. company will have it's efficiency to price the petrol lowe or in par with PSU pumps. But I was wrong. I don't understand why Shell chose to follow PSU pumps and raised prices after them??
I am not sure about this logic, but does govt. compel Pvt. companies to keep their prices higher than the PSU pumps? Any guesses?
Price and cost have no relationship in a free market setup. Private OMCs are free to price their products. Shell thinks it can get enough customers even if its product has a premium of Rs. 2/- and is moving in tandem with PSU prices while maintaining the premium.
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Old 9th November 2011, 19:39   #125
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Yessir. I sure would love to but cannot find exact source of info.

However, telecom towers are big users of diesel, bigger than railways. Please see link below:
'Diesel used for telecom towers causing Rs 2.6Kcr loss to govt' - Economic Times

The only thing that I fear (not sure though) if 15% as a claim was a more forward looking statement or was it current usage. But as you can see the usage is high and increasing. I hope this helps!

~maniac

Quote:
Originally Posted by Mik View Post
@Serious Manic: "The biggest users of diesel are generators"!! Care to enlighten us from where are you getting the data.
Please refer to this post
http://www.team-bhp.com/forum/indian...ml#post2456528

The break up of diesel usage was reported in various newspapers sometime back.
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Old 10th November 2011, 12:34   #126
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

I am sorry I was away so I missed the jargon dump

Quote:
Originally Posted by phamilyman View Post
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.pdfIGL made a PAT of 69cr on a topline of 566 cr. 12% profit margin!!
Let me not quote you point by point, as I don't see much points mentioned anywhere. Your statement about " Even monopolistic markets are allowed profits" itself says that you have no idea what you are saying. An unregulated monopolistic market IS the place for seller to reap profit.

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Originally Posted by phamilyman View Post
Of course, profits have to be reasonable.
Of course, May I know reasonable= ?

Quote:
Originally Posted by phamilyman View Post
And what profits, may I ask? 7830cr on a topline of 314710 cr i.e 2.5%?
That too by subsidies from government of India (according to you). So why would government roll out subsidies to make a company profit of 7830 cr?

Quote:
Originally Posted by phamilyman View Post
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!!
Let us know when you really dig

Quote:
Originally Posted by phamilyman View Post
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.
Air India example is NOT relevant. Because it doesn't fit into your argument?

Digging data? Buddy, If I have to dig whenever you say, I might find crude oil on my own

Just to cut it short. My point is that petrol prices has been regulated for decades. The same decades saw many wars and oil crisis. IOC itself was established in '60s and survived till now. Government of India could have controlled the prices even now, if they wanted. Whether they want to do it or not is another question altogether. After all we have people at the top who say "Oh I knew it was wrong, then I couldn't say it"
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Old 10th November 2011, 15:22   #127
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

"Petrol price hikes are unjustified..the govt is fooling/ looting us" discussions have been going on for sometime. Until now, I didn't bother to pen down my thoughts but let me do so now.

Many of you are complaining that the govt is collecting money in one pocket (taxes) and the other pocket (OMCs) are crying that they are losing money and that it's unjustified.

Well, customs duty, CENVAT, excise duties are there on all goods - right from your toys to hairpins to cars to every thing being sold under the sun. If the govt removes the taxes on fuel (and why pray should they do so? - just because 5% of the population have cars/ bikes and now find it unaffordable to use them??), what justification would there be to tax any other good - they should also stop taxing medicines? And how about clothes (100% of the populations wears it)? Or how about pens, pencils, notebooks (they provide education)? You see - before the govt can even think of reducing taxes on fuel, there are other things that merit more of a tax reduction. A tax is a basic practice that keeps a govt running. When you are questioning its right to tax fuel and then providing subsidies to OMCs, you are essentially questioning the existence of a govt.

As a concept, taxing a rich man's fuel to subsidize education, rural employment etc. is the right concept. You can't fault the govt in the concept. Practice? Well, that's an altogether different discussion.

If fault the govt you have to, fault it on not providing good public transport. Fault it on providing good roads, poor infrastructure.

A few days ago, TOI mentioned that while petrol prices in India are similar to that in Europe, on PPP basis, the prices are the highest in the world. True! But the answer is not to make it cheaper on PPP basis but to increase the PPP altogether. And well, NREGA, free education etc are doing exactly that.

All my arguments uptil now are theoretical arguments (and I stand by them!). But, let me come to my final argument. You and I are a small% of the votes. Those who will mostly vote will vote on the benefits accrued due to NREGA or on the basis of caste!
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Old 10th November 2011, 22:17   #128
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

The real question is how to stop this onslaught?
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Old 10th November 2011, 23:31   #129
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by srishere View Post
The beeline of trucks transporting fuel itself is a crime. They not only wasting fuel, they further block roads and cause further waste of fuel. Railways should be used to the maximum. In cochin, near tripunitura, vehicles at times would stay blocked for a long time. Same thing happen on the highway that exits out to tamilnadu.
Excellent article. Thanks.
Hi
I am from Cochin. The fact is simple, it would mean its cheaper to have good wide roads and fly overs so that you save fuel. Cost of procuring land is a one time investment which can save recurring costs by way of low mileage. Why do we not want wider roads?
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Old 10th November 2011, 23:48   #130
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

I read somewhere (can't recollect the website) that Indian OMCs are not leveraging forward contracts. If that is true then it is quite strange since OMCs in other countries do tend to leverage forward contracts to amortize costs in a rising crude regime. On the other hand when crude prices go down OMCs complain that they cannot immediately reduce prices since their existing stock was acquired at the earlier higher price.
I have come to know from discussions with some sources in technology companies (which I can't name) that worldwide there are lots of untapped crude reserves, some not yet discovered due to lack of proper analytics and data mining and some due to geo-political reasons. Those companies are helping different countries bridge the analytics part using new emerging technologies and the crude landscape may well change in future due to these. They have attempted to reach out to Indian OMCs and the response they got is "Hmmm, er, ummm, well, lets see, we will look into it ...". The bureaucracy is stifling.
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Old 11th November 2011, 09:47   #131
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by Gansan View Post
Even if it is just 0.001%, it should not be subsidized. A carpenter or electrician filling his TVS-50 at a pump should not subsidize the fuel of the Merc right next to him.
I agree. But he is not subsidizing the fuel of the merc only. He is also subsidizing the armed forces, railways, commercial transport vehicles, industrial generators, etc. It's like politics, there is bound to be a leak some where, but as long as there is greatest good, we can let off some evil merc owners.
I believe that if not through petrol, govt. will collect its dues through alcohol.

@ManishK83; completely agree with you. This is an automotive forum and so everyone cries when fuel prices go up. In a gold forum, everyone cries when gold goes up. In a stock market forum, everyone cries whether the market is up or down.
People protested even when the price of petrol was Rs.2/- per gallon(3.8L). It is an economic issue that is politicized. like inflation and bank interest rates.
What I would like is a clear single tax, say 60% of your gross profits. And abolish the multiple tier tax system where no one knows how much is being taxed and what happens to the tax money.
Example, take a car- we pay sales tax and road tax, registration fees, sales tax on insurance, sales tax on accessories, etc. but the buck does not stop here. We also pay for the octroi of the car, sales tax on the raw material, excise on imported parts, sales tax on OEM components, mining permits for raw material, etc.
Now I think a better way would be: Ford figo Zxi- Cost price 200,000; Tax 400,000; Total selling price 600,000.
This way, a lot of leaks, pilferage, mamool, black money, etc. would be plugged.

Last edited by wildsdi5530 : 11th November 2011 at 10:05. Reason: additional comment
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Old 11th November 2011, 10:43   #132
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Had spoken to a person who works in petroleum industry and he claimed the actual cost of petrol would be only around Rs 24.

People did protest when the prices were much lower but then the incomes too were much less.

How much can the increase in prices be absorbed ?. The rich can anyway afford as the increase is a tiny fraction of their income but still will end up passing on the cost. Others take varying levels of a hit.

There is no point in saying only a small fraction of people use petrol since their effect on the economy is big and price increases will be ultimately passed on whether the affected are poor or rich.

If the governments effectively used the huge taxes collected to build and maintain infrastructure like roads and cheap, well connected public transport, people might not protest so much since there is real saving and benefits.

It feels good to complain about Merc/BMW owners using cheaper diesel but their number are small and we should remember they are largely job creators too.

Last edited by vivriti : 11th November 2011 at 10:45.
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Old 11th November 2011, 12:17   #133
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

I am looking at Indian Oil's Quarterly Results where they have shown a record operating loss of INR 6586 cr i.e. INR 65,86,00,00,000 for the last quarter

What is interesting to note is that while net sales have increased by 28% Q on Q, the expenditure has increased by 34% in the same time period.

If you take a closer look at the expenditure,
1. employee costs have decreased by almost 30%
2. other expenditure has increased 70%
3. 'Consumption of Raw Materials' as an expenditure item has increased by almost 50% from 30k Cr to 46k Cr. It is safe to assume that this line item means 'cost of operating the refineries, capital expenditure in increasing capacity etc.'

Argument 1: How can there be such a steep rise in cost of operating a refinery in 1 year?
Argument 2: If there is an additional capital expenditure to expand capacity etc. then the 'loss' is not due to 'inability to charge a certain price form the consumer'

The 'Loss' seems to be 'cooked' up to garner support from the media etc.

There is another point to be noted here.
IOCL and similarly other OMCs buy from varied sources including OIL, ONGC, GAIL etc which are also Govt owned, and they are also charging a 'profit' on selling the crude to OMCs, hence the Govt is charging profits twice, if not more, on the same product...

IOCL Q2 results pdf attached here..
Attached Files
File Type: pdf Q2results_09_Nov_11.pdf (1.03 MB, 203 views)

Last edited by RegularIndian : 11th November 2011 at 12:24. Reason: Removed extra URL text into the body of the post
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Old 11th November 2011, 12:29   #134
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by RegularIndian View Post
I am looking at Indian Oil's Quarterly Results where they have shown a record operating loss of INR 6586 cr i.e. INR 65,86,00,00,000 for the last quarter

What is interesting to note is that while net sales have increased by 28% Q on Q, the expenditure has increased by 34% in the same time period.

If you take a closer look at the expenditure,
1. employee costs have decreased by almost 30%
2. other expenditure has increased 70%
3. 'Consumption of Raw Materials' as an expenditure item has increased by almost 50% from 30k Cr to 46k Cr. It is safe to assume that this line item means 'cost of operating the refineries, capital expenditure in increasing capacity etc.'

Argument 1: How can there be such a steep rise in cost of operating a refinery in 1 year?
Argument 2: If there is an additional capital expenditure to expand capacity etc. then the 'loss' is not due to 'inability to charge a certain price form the consumer'

The 'Loss' seems to be 'cooked' up to garner support from the media etc.

There is another point to be noted here.
IOCL and similarly other OMCs buy from varied sources including OIL, ONGC, GAIL etc which are also Govt owned, and they are also charging a 'profit' on selling the crude to OMCs, hence the Govt is charging profits twice, if not more, on the same product...

[IMG]file:///C:/Users/SAMEER%7E1.MAT/AppData/Local/Temp/moz-screenshot-2.png[/IMG][IMG]file:///C:/Users/SAMEER%7E1.MAT/AppData/Local/Temp/moz-screenshot-3.png[/IMG]IOCL Q2 results pdf attached here..
Consumption of raw material = price of crude (which is the raw material for petro-products).

Its got nothing to do with running cost or plant & machinery.

Please amend the rest of the post accordingly.

If selling petrol and diesel was profitable in India, then Reliance and Essar (both have their own refineries) would've been selling the same at the current prices.
http://www.team-bhp.com/forum/shifti...rol-pumps.html (Reliance to shut petrol pumps)
http://www.thehindubusinessline.com/...ce?ref=archive
http://www.financialexpress.com/news...pumps/288187/0

http://articles.economictimes.indiat...-subsidy-outgo

Last edited by alpha1 : 11th November 2011 at 12:39.
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Old 11th November 2011, 12:37   #135
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Default Re: Fuel Pricing in India. Detailed Robbery Analysis.

Quote:
Originally Posted by alpha1 View Post
Consumption of raw material = price of crude (which is the raw material for petro-products).

Its got nothing to do with running cost or plant & machinery.

Please amend the rest of the post accordingly.

If selling petrol and diesel was profitable in India, then Reliance and Essar (both have their own refineries) would've been selling the same at the current prices.
Business Line : Today's Paper News : Concern over Reliance move on petrol pumps

Alpha1: Please look at the expenditure table of the attachement

Item 6b is 'Purchase of Items and Crude for resale': 40k Cr
Item 6c is 'Consumption of Raw Material': 46k Cr

It is the '6c' that I am talking about. If this is the price of crude, then what is 6b?
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