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Old 3rd February 2010, 18:08   #1
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Default Kirit Parikh panel for freeing petrol, diesel prices

I just read this article in ET.
Link to the article - Kirit Parikh panel for freeing petrol, diesel prices- Oil & Gas-Energy-News By Industry-News-The Economic Times

NEW DELHI: Kirit Parikh on Wednesday presented the report on fuel pricing to Petroleum Minister Murli Deora. The panel in its report advocated total decontrol of oil prices, while recommending an immediate increase in prices of kerosene by Rs 6 per litre.
The committee headed by economist Kirit Parikh also pegged the losses of state-run oil marketing companies at Rs 40,000 crore on account of having to sell transport fuels at below cost.
"The fuel pricing policy will address government's fiscal problems," said Parekh at a press conference. In its report tha panel suggested to free petrol prices at refinery and at retail level. PSU oil companies at present lose Rs 3/litre of petrol. It also recommended retail diesel prices be market driven.
"There is no way we can continue with the current pricing policy," said Parikh while discussing the recommendations here.
The government may take a decision on freeing petrol and diesel prices after the report. Price of petrol may go up by Rs 4.70 a litre and diesel by Rs 2.30 a litre if the government gives the pricing freedom to state-owned oil marketing companies - IndianOil Corporation (IOC) Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL).
A price hike of petrol and diesel is imminent unless finance ministry pays full cash compensation to state-owned oil companies for kerosene and cooking gas, an oil ministry official said requesting anonymity. The finance ministry has decided to pay a compensation of only Rs 12,000 crore in 2009-10 to public sector oilcos for selling kerosene and cooking gas below cost as against total estimated revenue loss of Rs 31,000 crore in the fiscal year.
In July last year, the cabinet had taken a decision to meet the entire revenue loss of public sector OMCs on cooking gas and kerosene either through oil bonds or cash.
Losses on petrol and diesel were to be compensated by state-owned upstream companies - ONGC, Oil India and Gail India, he said. The upstream companies have already paid about Rs 8,364 crore to the three public sector oil companies for their losses on auto fuels in the first three quarters of 2009-10 .
The finance minister, however, wants to reduce fuel subsidy burden. He is in favour of deregulation , as mounting subsidy burden is a major concern for the public exchequer. The government had to pay over Rs 71,000 crore in 2008-09 as fuel subsidy though oil bonds.
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Old 3rd February 2010, 21:21   #2
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Default As early as possible.

I price deregulation should be done ASAP. It doesnot make sense for the government to subsidize fuel prices.
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Old 3rd February 2010, 23:34   #3
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I price deregulation should be done ASAP. It doesnot make sense for the government to subsidize fuel prices.
I beg to differ. Think of the millions who would be affected by the same. Not everyone can afford milk in this country and Petrol is double the price of milk.
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Old 3rd February 2010, 23:44   #4
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I beg to differ. Think of the millions who would be affected by the same. Not everyone can afford milk in this country and Petrol is double the price of milk.
I agree with you. Fuel prices shouldn't be hiked. Government should review the tax rates on fuels instead.
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Old 3rd February 2010, 23:56   #5
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I also think before they freeing up the price they also should remove un-neccesary tax burden on the FUEL. More than 50% of the prices are becos of various taxes and duties.
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Old 4th February 2010, 00:09   #6
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Successive govenrments since independence have looted indian public by burdening fuel with all kinds of taxes. someone should ask the government under the Right To Information Act to show what price they procure crude, what are the refining costs and what profits and taxes are added to these. then we will see why fuel is already sold at absurdly high price. also, crude prices have fallen steadily over a few months internationally. so why this sudden rush to revise? automotive fuel is the milch cow that GOI milks till its udders bleed. and they talk of subsidy. subsidy, my foot! they jack up a 20 rupee thing to 60, then sell it at 55 and call it a 5 rupee subsidy. wow, what a ploy! It's a grand theft by GOI.

even for once assuming, they have subsidised; what is wrong with it? the whole of US and western europe subsidise their agriculture but when it comes to us, they dictate us through the World Bank that we should do away with subsidies.
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Old 4th February 2010, 00:53   #7
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If fuel prices are deregulated, the absurd taxes put on petrol/diesel should go with just. Just a regular VAT/Sales tax as other commodities should be there in place - and we can all get petrol at around half the price we are paying now.

PGsagar is right, they 'subsidize' what they sell to us with the taxes collected from us!
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Old 4th February 2010, 02:26   #8
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Price regulation on diesel and petrol in India will go. When? When pigs fly!!

Government needs courage to do this, btw who pays for the subsidy? Its a joke. Have heard these statements millions of times before, this aint gonna happen. Period.
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Old 4th February 2010, 03:58   #9
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Quote:
Originally Posted by pgsagar View Post
Successive govenrments since independence have looted indian public by burdening fuel with all kinds of taxes. someone should ask the government under the Right To Information Act to show what price they procure crude, what are the refining costs and what profits and taxes are added to these. then we will see why fuel is already sold at absurdly high price. also, crude prices have fallen steadily over a few months internationally. so why this sudden rush to revise? automotive fuel is the milch cow that GOI milks till its udders bleed. and they talk of subsidy. subsidy, my foot! they jack up a 20 rupee thing to 60, then sell it at 55 and call it a 5 rupee subsidy. wow, what a ploy! It's a grand theft by GOI.
+1. I completely agree. In fact in one of the earlier rediff articles, it was mentioned that actual cost of petrol is around 25 rupees/litre at the refinery gate. On top of it, they add all the central excise and state taxes and jack it up to 55 odd bucks. I don't know why they call it as subsidized item.

Here in US, they sell approx. 4 litres of petrol for around $2.5, which comes to around 32 odd bucks per litre of petrol. There is no subsidy, and they have very low taxes.

Why is it different in india ?
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Old 4th February 2010, 05:34   #10
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There is no subsidy, and they have very low taxes.

Why is it different in india ?
May be something to do with the fact that they have their Army stationed in couple of middle-east countries?

What are the fuel costs in UK like?
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Old 4th February 2010, 09:27   #11
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The subsidy is just an illusion. Well, there may be a subsidy - but then there are humongous taxes which more than makes up anyway for it. Except for a minor reduction an year back when fuel prices really shot up.

My take would be to deregulate it and also reduce the tax burden. Economy is not something that you can keep in chains for long by subsidizing. Will the govt do that? Na, i dont think any government is going to taking that decision anytime soon.

And for all those naysayers, they said worse things when we opened up our economy in early 90s. People are just change averse.

Last edited by SkyWalker : 4th February 2010 at 09:30.
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Old 4th February 2010, 09:43   #12
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Even I read this today morning, we need to really think if subsidy is taken off on petrol and especially diesel then the repurcussions on the commodity prices and transportation will be enormous, even cooking gas will be a thing to worry. Now in my village most of the families now are able to afford cooking gas, but i doubt if the prices increase then they might switch over to their old style of cooking with firewood and cotton plant twigs. Really a sad thing.
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Old 4th February 2010, 10:26   #13
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Government will never remove subsidy as where will it get the money to give free power to well off farmers , buy rotten food grains at high prices to sell to poor people and for the all the populist policies like distributing television sets etc.

The most hardship is faced by the Petrol vehicle owners as no one is their to support them .The irony is am large part of working class at lower end use petrol vehicles .


Regards
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Old 4th February 2010, 11:41   #14
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Angry Crazy Govt . #$#@$@#$ !!!

It would be just good for everyone if the govt. just removed the damn excise tax, and what ever other bull crap tax that they levy on petrol etc. Problem solved.
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Old 4th February 2010, 12:24   #15
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Though I really dont know how the system works , I think everything is fine as it is . They first tax the fuel , then save the oil companies with that same money and we get fuel at reasonable cost ( I think so ! not sure ) .
The aam admi gets kerosene and lpg at a reasonable cost .
Market forces may not necessarily regulate the price with the dominance of the government majors .
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