[sgiitk]

Originally Posted by bhardwhu

The fiscal deficit for the year has hit 99% of the targeted figure already and that means the overspending of the government has to be funded from whatever sources possible......
The fuel sale is a milch cow for any government as can be seen in the recent GST debate where almost all states are clamoring for auto fuel to be kept out of GST. That way, they could levy excise and fill coffers as they want.

With GST Excise (which is in any case a Centre subject) will be history. SO it will the the local VAT masquerading as GST.

[sandeep108]

Originally Posted by humyum

Well Diesel was not deregulated then and even with the crude at its high's and government subsidies, Oil marketing companies like BPCL and IOC were selling it at a loss to keep the prices low. Check out their balance sheet and quarterly results, they are filled with losses.

Even if diesel was not de-regulated then why were they shouting from the rooftops that crude prices are $110 per barrel and diesel subsidy has reached Rs. xx/L? And at every whiff of crude price increase or rupee exchange rate weakening they immediately increased prices - what about the inventory at lower prices?

The losses on the balance sheet are related to many things, including but not limited to LPG/kerosene subsidy, etc. Let the oil PSUs release audited figures of profit/loss on de-regulated fuels.

States will not increase VAT - the rates are already sky-high - since the increase in excise duty will now compensate for any reduction. VAT is ad-valorem after excise so states will also enjoy.

We have to accept heavy taxation on fuel, our government has no choice since so much of the economy gets away with minimal or no tax.

[manas27587]

The only way to bring down fuel prices is to make the government employees pay for fuel from their own pockets.
I still don't understand how they plan these reductions.
When prices lowered from 140-100 no reductions were made citing high dollar rates but now when it is 60 it has not been reduced saying excise duty was zero.
I still remember paying ₹40 for diesel when i bought my car 3 years ago.
The only wave this government seems to be riding on is luck.
If the prices would have stayed at the $100 mark I wonder how they would have filled their coffers.

[ILTDrive]

So, they are going to use the funds collected by this hike to the building of 15,000-km of roads, during current and next financial year, will these roads be toll free then ?

[arun_kun]

Does anyone know how many litres of petrol and diesel is sold in India daily? Just want to see how much govt earns on the oil?

OMC want to wipe off their accumulated losses and the state and central governments cover up their budgetary deficits by hook or by crook - mostly by crook - by not passing on the benefit of declining international crude oil prices to the consumers. Moreover, there are no elections round the corner.

[saurabhkum]

It's now a very interesting thing coming out. Govt doesn't want to make Oil Marketing Companies profitable instead they are ensuring the prices are reduced by them and subsequently increasing the taxes so that common man doesn't get the benefit. Also what about all the shareholders of these PSU's ? The are at loss as the companies are not making the profit while the biggest shareholder is getting the money in terms of taxes.Even If the Govt wouldn't have allowed prices to fall by Oil Marketing Companies and taxes to remain the same still these companies have made some profit and dividends would have been given both to Govt and public but looks to me Govt is all set to take all the benefits. This Infrastructure story is also not correct as that was mentioned in budget and for that cost of project it was not mentioned as taxes to be increased.
If the crude prices wouldn't have fallen to almost half in last 6 months then had the Govt done the same thing of increasing taxes? Another very important thing is that the taxes on petrol are not on a percentage term but on a fixed rupee per liter. To make the matter worse this fixed Rupee per liter has increased by 6 Rs in last 12 months. If there would have been a percentage basis of Tax the Petrol in Delhi would have been costing 50 Rs Per liter. I'm attaching the price build up data for last January and this January.

Also if we compare last year when the costing of Refinery Transfer price was 46.19 Rs we used to get the petrol at 71.57 Rs The total overheads where 55%, currently when the Refinery transfer price is 27.25 Rs we are getting Petrol at 61.39 Rs the total overheads are whooping 125%. The Oil Marketing companies margin was less than 2 Rs last year which is currently at 6.5 Rs. Couldn't understand the reason for 3 times increase in their margins.

[jaaz]

Originally Posted by joslicx

Not so simple to make blanket assumptions my friend.

If price goes down by 40%, revenues also fall correspondingly (assuming, lets just first consider this case, correspondingly not much increase in demand). This mean less (revenue) income for the govt as well (from sales, dividend etc). Oil income is a big income for govt that is used to support so many of social programs (of the order of 3L crores).

If, on the other hand, lets say govt allows prices to go down and now correspondingly demand also increases (by 40% so that no loss of revenues) this would mean 40% more imports! That will further distort the Account Deficit, budget, rupee value and everything! Increased pollution in our cities would just be a bonus.

It is not a very straight-forward govt doing things only to fill their coffers. Oil pricing is definitely much much more complicated matter.

Can you Please explain with supporting figures. From another source, What I learnt was after the Petrol was deregulated, the Excise duty was not collected as a Percentage, but a Fixed amount or in terms of Rupee Calculations. As a layman, my figures are simple - Crude Prices down by >50%, but Fuel Price reduced <15%. Where is the Rest of the Money going???

And we all know how much a Common Man receives out of every Rupee collected by the Government - I guess it's <15%

Originally Posted by saurabhkum

It's now a very interesting thing coming out. Govt doesn't want to make Oil Marketing Companies profitable instead they are ensuring the prices are reduced by them and subsequently increasing the taxes so that common man doesn't get the benefit. Also what about all the shareholders of these PSU's ? The are at loss as the companies are not making the profit while the biggest shareholder is getting the money in terms of taxes.Even If the Govt wouldn't have allowed prices to fall by Oil Marketing Companies and taxes to remain the same still these companies have made some profit and dividends would have been given both to Govt and public but looks to me Govt is all set to take all the benefits. This Infrastructure story is also not correct as that was mentioned in budget and for that cost of project it was not mentioned as taxes to be increased.
If the crude prices wouldn't have fallen to almost half in last 6 months then had the Govt done the same thing of increasing taxes? Another very important thing is that the taxes on petrol are not on a percentage term but on a fixed rupee per liter. To make the matter worse this fixed Rupee per liter has increased by 6 Rs in last 12 months. If there would have been a percentage basis of Tax the Petrol in Delhi would have been costing 50 Rs Per liter. I'm attaching the price build up data for last January and this January.

Also if we compare last year when the costing of Refinery Transfer price was 46.19 Rs we used to get the petrol at 71.57 Rs The total overheads where 55%, currently when the Refinery transfer price is 27.25 Rs we are getting Petrol at 61.39 Rs the total overheads are whooping 125%. The Oil Marketing companies margin was less than 2 Rs last year which is currently at 6.5 Rs. Couldn't understand the reason for 3 times increase in their margins.

You've done very good home work, and the justification is very clear and understandable by any person. I've permanently saved your pdf files. And as per your calculations, it's neither the Oil Marketing Companies nor the Common Man and not even the State Government is the beneficiary.

Only the Central Government is benefited through Higher Excise Duty and as a Biggest Shareholder of these Oil Marketing Companies.

[mercedised]

AFAIK (please correct?) The prices of crude oil are locked for a certain period (say 3 months) while buying. Now, say that the international prices goes down in between these three months(say from 110 to 60$), and when the govt. locked the crude prices they were at 110$, how will the drop in international prices result in sudden drop in oil prices in Indian market?

[jaaz]

Originally Posted by mercedised

AFAIK (please correct?) The prices of crude oil are locked for a certain period (say 3 months) while buying. Now, say that the international prices goes down in between these three months(say from 110 to 60$), and when the govt. locked the crude prices they were at 110$, how will the drop in international prices result in sudden drop in oil prices in Indian market?

To some extent, you're right. But the Prices are not locked. The purchases are done on an average price, for say 3 months or so. These are Country to Country agreements. But the Prices keep changing on Daily basis. And in USA, the Prices change on Daily Basis. But in India, to avoid confusion, the Prices are changed every fortnight or 15 days to the Consumer. The Price of Petrol in USA was around $4.5, a year back and is now around $2.00 per Gallon.

Oil Marketing Companies are at liberty to purchase from Open Market too, thus benefiting from falling prices (hedging).

@saurabhkum - The Margin of Rs. 6.48, up from Rs. 1.96 and that too When the Crude Prices are falling are a direct benefit to the Govt., because it's a biggest or a Major Shareholder. But still it's a Trivia for me to understand, so better other bhpians shed a light on this.

I'm trying to source this information for Karnataka, as we pay, probably the highest price for Petrol in India.

[9tMax]

Originally Posted by jaaz

I'm trying to source this information for Karnataka, as we pay, probably the highest price for Petrol in India.

I was also under the same impression, that Bangalore, followed closely by Hyderabad, has the highest petrol prices in India. But then this information here http://hproroute.hpcl.co.in/StateDis...ce.jsp?param=C from the HP site shows something else.

It shows cities like Mumbai, Kolkata, Patna, Lucknow etc. are having petrol prices upwards of 68 rupees.

BHPians from those cities - can you confirm, to give us a little solace?

[NetfreakBombay]

Originally Posted by 9tMax

It shows cities like Mumbai, Kolkata, Patna, Lucknow etc. are having petrol prices upwards of 68 rupees.

Price in Mumbai is 68.9 something.

It is expensive due to local taxes like octroi.

[sgiitk]

Originally Posted by ILTDrive

So, they are going to use the funds collected by this hike to the building of 15,000-km of roads, during current and next financial year, will these roads be toll free then ?

No, very very unlikely.

Almost all the infra,esp. road construction industry is in trouble, most possibly due to the shenanigans of the MoE (J.Ramesh, Jayanti) who held back all clearances and the Bear (Bhalu & Co) too busy eating the honey. The money was invested with no roads to show for it. So the financing model has to be changed with some state funding.

[S_U_N]

Originally Posted by NetfreakBombay

Price in Mumbai is 68.9 something.

It is expensive due to local taxes like octroi.

Wasn't octroi replaced with LBT?

[JoseVijay]

As per TOI fuel prices may increase in the state of Telangana

Source link: http://timesofindia.indiatimes.com/c...w/45737337.cms

HYDERABAD: People in Telangana may soon have to shell out more for fuel with the state government mulling a hike in the value added tax (VAT) on petrol and diesel. This, despite the fact that oil is getting cheaper in the global market.

While the move is an apparent bid to ramp up resource mobilization in the face of reduced commercial taxes collection in the new state, it is also a cue taken from the Centre, which raised excise duty on petrol and diesel thrice in the past two months after the prices of crude oil started falling in the international market. The Centre garnered an estimated revenue of over Rs 30,000 crore, which came handy in reducing its fiscal deficit.

"The state exchequer is losing at least Rs 20 crore a month after the base prices of petrol and diesel started coming down. In order to make up the loss, we are considering a proposal to hike VAT rates on these commodities by two per cent," commercial taxes minister Talasani Srinivas Yadav told TOI.

There is a difference, however, in terms of the impact of the excise duty hike by the Centre and VAT hike proposal of the state government. The increase of excise duty did not result in fuel getting dearer for the consumer since the Centre asked the oil companies to absorb the component. But the two per cent hike in VAT rates in Telangana would result in higher prices of petrol and diesel since it would be passed on to the consumers.

"It is time to share the distress and I hope the consumers will understand. Resources are needed to build the new state and everyone has to chip in when revenue mobilization is under stress," Srinivas Yadav said.

The fall in the oil prices has resulted in loss of revenue for the state since the fuel taxation is based on an ad valorem system in India. Since the quantum of tax burden is a function of the base price of the fuel, it increases when the base price is increased and vice versa. In Telangana, the base prices of petrol and diesel are Rs 49.75 and Rs 44.14 per litre respectively. At present, they attract VAT at the rates of 31 per cent and 22.25 per cent respectively, resulting in consumer price of Rs 66.54 for petrol and Rs 54.88 for diesel.

Now, with the state government planning to hike the VAT rates by two per cent, petrol and diesel are likely to be dearer by about Rs 1.60 and Re 1. If this is done, Telangana, which is known to be the state where the fuel costs are already high, will further move up in the pecking order. (In Karnataka, which is in the second place, the VAT rates on petrol and diesel are 25 per cent and 15.85 per cent respectively)

Industry experts, thus, are not too enthusiastic. "Maybe the proposed hike is justified since the tax collection in the new state is not up to the mark for various reasons. But, it is not advisable at this stage since the increase in fuel prices will induce inflation in the state as the commodity prices are cheaper in neighboring states. The situation may even lead to trade diversion to other states," said M V Rajeswar Rao, former secretary general of Federation of Andhra Pradesh Chamber of Commerce and Industries (FAPCCI).

While pointing out that state governments never consider reducing the rates of local sales taxes on petrol and diesel when the base prices go up, Rajeswar Rao said it is unfair to the consumers to hike the tax rates when the base price is falling. "While the state government wants to increase the tax rates, the question is whether it would show the same enthusiasm to reduce the rates in future in case the base prices are up and save the consumers from bearing the brunt," he said.

Consumer at a loss

* Base price of petrol and diesel are Rs 49.75 and Rs 44.14 per litre respectively in Telangana. They attract VAT rates of 31% and 22.25% respectively, resulting in consumer price of Rs 66.54 for petrol and Rs 54.88 for diesel currently

* With 2% hike in VAT, the prices would go up by about Rs 1.60 and Re 1 for petrol and diesel respectively

* Experts fear the move would induce inflation as commodity prices would be cheaper in neighbouring states. It may also lead to trade diversion to other states

* Experts also wonder whether the state would lower the VAT rates once the base prices go up in the global market in future