[Sandeep500]

Sir, The problem with us Indians is that we try to defend and justify the things which we know from our heart are wrong. The crude which the country bought for roughly 147$ or even more and then sold via going through the same procedure was possible through even govt or PSU,S which have higher operating costs than private players.

Now we all know the companies like reliance etc had closed their fuel outlets when they found them non profitable. They are not going to operate in loss making conditions.It is unfortunate that despite such a drastic fall in crude prices it is not passed on to people saying that country needs to fill its coffers for fighting Covid19. But this is half truth because increase in govt. taxes is only a small fraction, rest is getting gulped down by private companies. It is not going in govt. kitty but to these private companies. Are they going to give it to govt.?

See the amount contributed by Reliance,Vedanta or other such companies for fighting Corona. Amounts like 500 , or 100 cr. etc. These people can spend thousands of crores on weddings but in such emergencies, this is their contribution. It is only old companies like TATA which have contributed generously amounts like 5000 crores or so if I am right. Have we ever herd a wedding in house of Tatas where such huge amounts of money is wasted. Wake up my dear friends and see the truth .

[alpha1]

Originally Posted by manjubp

1. Every company/manufacturing organization has fixed cost of running/producing a product. Like salaries, maintenance, depreciation, rents, etc., This is independent of the volume of the business for short term duration.

2. Then there is variable cost which is function of the volume, like raw material, tax, power consumption for machinery etc. This cost is depend on the volume of business or product manufactured.

End product cost = Fixed cost/Volume + variable cost per unit

Interesting to note that based on volume of business, the share of fixed cost in end product cost is variable and variable cost component of the end product cost is constant.


In this case only variable cost, which is raw material has reduced. However overall fixed cost still remains same.

In normal situation, where volume of business is same, the End product cost would have been reduced with reduction is raw material cost, which is variable cost.

However when the volume of the business is near zero like today, wrt to original volume may be 4 months back, the end product cost may be even higher than the earlier end product cost, when volume and raw material cost was high.

So in summary low volume is big concern, which will take away all the cost advantage of the low raw material cost.

I did a "back of the envelop" calculation in the good ol' days:
https://www.team-bhp.com/forum/india...ml#post3590773 (The Official Fuel Prices Thread)

Capex (fixed cost) is a actually a small amount in regular running of a refinery. Opex is even smaller. The cost of crude is the most important factor for determining the cost of products.

Of course what you say is correct, and will change the equation a quite a bit, but not to the extent that it will skew the relation (you can fill the numbers yourself).

Originally Posted by Sandeep500

It is unfortunate that despite such a drastic fall in crude prices it is not passed on to people saying that country needs to fill its coffers for fighting Covid19. But this is half truth because increase in govt. taxes is only a small fraction, rest is getting gulped down by private companies. It is not going in govt. kitty but to these private companies. Are they going to give it to govt.?

How? Do you have rough numbers?

[Pancham]

Couple of points with regard to why fuel prices have not come down:

1. Rupee has depreciated substantially. So oil import bill has significantly gone up for the government

2. There is no demand for fuel for the past 1 month. So there is no point in reducing prices. Rather reducing prices can have two adverse effects:

a. Huge lines at petrol pumps during the lock down, thus, increasing the chances of spreading COVID-19 significantly

b. Even lower tax revenue due to the (already existing) lack of demand

[longhorn]

If anyone is interested to cut past the clutter in terms of rupee depreciation, Covid fund and what not, and put a number to the legalised loot happening around fuel prices, please take a look at the link I have posted below. To summarise, the cost of crude oil per litre, after accounting for rupee depreciation, plummeted from Rs 30.08 on 1st Jan 2020 to Rs 16.28 on 14th March 2020.

https://www.mycarhelpline.com/index....=417&Itemid=10

[deadguy25]

Originally Posted by longhorn

If anyone is interested to cut past the clutter in terms of rupee depreciation, Covid fund and what not, and put a number to the legalised loot happening around fuel prices, please take a look at the link I have posted below. To summarise, the cost of crude oil per litre, after accounting for rupee depreciation, plummeted from Rs 30.08 on 1st Jan 2020 to Rs 16.28 on 14th March 2020.

https://www.mycarhelpline.com/index....=417&Itemid=10

Thank you for the link. Sad to see how the cost cut is not being passed onto the end user. I guess if the crude oil prices increase from 16.28 then we will have to bear the brunt of increased cost in fuel.

[Miyata]

Originally Posted by longhorn

the cost of crude oil per litre, after accounting for rupee depreciation, plummeted from Rs 30.08 on 1st Jan 2020 to Rs 16.28 on 14th March 2020.

One reason (among others) for this appears to be in - list of most profitable government organizations (PSUs) in India! They are largely the oil, gas, and electric based ones.

How do they maintain that status of being profitable - buy goods (oil) for 20 and sell them for 70+.

Apart from ISRO, I am not really aware of any other government organization that has good returns on investment (of government money). High oil prices is one way of profiting and showing "good management" even if there be none.

[ValarMorghulis]

Nagaland has imposed a Covid-19 cess which might encourage other states to do the same.

Nagaland,which does not have any novel coronavirus case, impose Covid-19 cess on petrol and diesel sales. While Nagaland is the first state to impose a Covid-specific cess, Assam recently increased taxes on petrol by Rs 6 and on diesel by Rs 5, while Meghalaya is charging sales tax surcharge on motor spirit such as petrol at 2%.

Link here

[landmaster18]

Originally Posted by manjubp

It is still completely deregulated. It is not that the government or refineries are making lot of money. Maybe I'm wrong, but let me share my thoughts.
Disclaimer, I am not an economist nor good in money matter, but an engineer by accident.
However when the volume of the business is near zero like today, wrt to original volume may be 4 months back, the end product cost may be even higher than the earlier end product cost, when volume and raw material cost was high.

So in summary low volume is big concern, which will take away all the cost advantage of the low raw material cost.

I (currently) trade commodities and used to aggressively trade crude oil contracts until about a year ago. I was led to believe that the big upstream companies like IOC and BPCL had signed forward contracts locking in the prices. I am yet to stumble upon any proof for this however since this was just word of mouth information.

I would like to see some benefits being passed on to the end customers like us. They cannot simply keep rising excise duty and keep the price sky high still.

[M00M]

Whether the individual is a blind devotee or a unfollower or a follower or a anarchist follower, a wrong is a wrong, petrol diesel should be selling at a lower price and should be around the range of 25-30 rupees a litre. The reason we will never see that is because all states and GOI treat fuel as a cash cow for the short fall in tax requirements and they're needing all the funds right now for covid and then for the next 2-3 years to recover from covid fall out. I've said before comparisons with developed countries makes no sense when we have citizens trying to find every tax loophole to avoid paying of taxes and also avoid paying taxes by doing black money transactions. I don't think we will see low due prices in our country. People gotten used to current levels so states and GOI will keep raising duties to maintain this level so that they can recover their expenses from fuel. Not the correct way but I don't see it going any other way.

Maharashtra biggest culprit in keeping highest state taxes on petrol and even with change of government ruling party there is no action on reduction or any future expectation of reduction.

[OrangeCar]

Excise duty on petrol hiked by Rs 10/- and on diesel by Rs 13/-.

But apparently we have to celebrate this, since there is no change in retail prices. We Indians apparently are too entitled to reap any sort of benefit or joy in drop of crude oil prices.

Once economies across the globe open up, fuel demand will go up and thus crude oil prices. Will we see drop in excise duty then? Or government inefficiencies and its inability to manage finances will have to be borne by common man? Time will tell.

Worse still, these steep hikes, if partially reduced are hopefully not presented as people friendly measures by a fantastically performing government, around the time of elections.

There were times when crude oil prices well exceeded $100 a barrel and the government of that day was able to still manage things. Those were the times when fuel subsidy was still a thing. Though that government was criticised for fiscal slippages.

Today, from the era of fuel subsidies to steep taxes, India has come a long way!

A political catch phrase was very poplular in 2014. Then, I too believed and hoped for it. Today, I put a question mark at the end of that phrase. Achhe din.. aane wale hain?

[romeomidhun]

Collecting this much additional tax from a litre of fuel compared to 6-7 years back and doing nothing beneficial to the people - what will you call this? The saving from the reduced crude oil price may be to the tune of lakhs of crores per year, I guess. Dollar appreciation is just 30% while the brent crude price is reduced to 1/3rd.

[anb]

India should fix the prices of petrol and diesel at Rs.100 irrespective of crude oil prices so that the additional revenue generated can be used for development. India will become a developed nation like USA in 4 years.

[anb]

State govts are spending money for free treatment of Covid patients and state govts have no income. Centre govt had the opportunity to support the state governments financially by not increasing the "Special" excise duty steeply so that state govts can increase the VAT without affecting the fuel prices. Now that opportunity is gone.

[ABHI_1512]

We all know that petroleum and alcohol were deliberately kept out of the GST net because the states did not want to let go of the earnings of the cash cows. But even then, the hiking of excise duties to the levels unheard of till date is just not fathomable. The states will off course try to shore up their finances since they are short of revenue from other fronts but the hike in excise could have been kept to a minimum and the prices lowered somewhat by passing on the benefits of the lower crude prices. This de regulation of prices of petroleum is a joke played on us. Previously also, when the crude prices fell , the government refused to pass on the benefits and instead kept on increasing the excise duties. As much as we crib, this is the way it has always been. And now, the COVID situation will empower the authorities to put a premium on whatever they deem fit. So, I guess, we have to live with the prices for now and going forward as well.

[DigitalOne]

Some facts which many in this forum seem to be completely unaware of.

Fuel Taxes in India constitute:

1. Excise - Collected by Central Govt
2. VAT - Collected by State governments.

VAT is on % basis on top of Base Price + central Excise. Which means if Center increases Excise, the states collection of VAT goes up automatically, even if they don't do anything.