High excise duty and VAT on fuel results in high inflation, higher subsidy payments on fertilisers, food, etc, and low international competitiveness of Indian goods. Centre is desperate to grab any opportunity available to garner additional revenue. Therefore, it has hiked the duty. ———————————————————————————————— In the wake of widespread destruction of demand triggered by Covid-19, failure of OPEC and non-OPEC suppliers to agree to a production cut, and the two front-line exporters from the respective groups viz. Saudi Arabia and Russia vying to capture the shrinking market, the price of crude oil has plunged to less than $30 per barrel. Leveraging this, in sync with its past practice of mopping up the oil bonanza, the Modi government has yet again...
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Category: Oil & Gas
Stop using fuel taxes as milch cow
Within a couple of months of beginning his first term, Modi was conferred with oil bonanza. The international price of crude oil [India depends on import for meeting over 80% of its requirement] had moved on a downward trajectory from a peak of US$ 117 per barrel in November 2014 to US$ 28 per barrel in January 2016. The government mopped up a major slice of this reduction by increasing the central excise duty [CED] on petrol from Rs 9.8 per litre to Rs 21.5 per litre and on diesel from Rs 3.8 per litre to Rs 17.3 per litre [the hike was given effect to in as many as 9 rounds]. After January 2016, the crude price increased gradually...
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Price control: The gas on gas price deregulation
Under a special package for deep/ultra-deep, high-pressure/high-temperature (HP/HT) fields announced in March 2016, the supplies therefrom are allowed ‘premium’ price, linked to the prices of alternate fuels, including fuel oil, naphtha, and imported liquefied natural gas (LNG). The government has initiated discussions to ‘lift price restrictions on domestically produced natural gas’. However, it intends to do it ‘gradually’. It wants to continue with regulated gas pricing for at least three more years. However, in the interregnum, producers will be given freedom to sell a portion of the total output under ‘negotiated pricing deals’ with their customers. Will it help? Under the guidelines in effect since November 1, 2014, for all domestic supplies from fields given under the new exploration and...
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Gas price deregulation – what is holding back
The government has initiated discussions to ‘lift price restrictions on domestically produced natural gas’. However, it intends to do it ‘gradually’. It wants to continue with regulated gas pricing for at least three more years. However, during the interregnum, producers will be given freedom to sell a portion of the total output under ‘negotiated pricing deals’ with their customers. Will it help? Under the guidelines in vogue since November 1, 2014, for all of domestic supplies from fields given under new exploration and licensing policy [NELP] as also blocks given on ‘nomination’ to Oil Natural Gas Corporation [ONGC] and Oil India Limited [OIL] under pre-NELP, the price [call it normal price] is a weighted average of prices at 4 international...
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Is the oil sector ready for competition?
Last year, Petroleum Minister Dharmendra Pradhan had set up an expert committee under Kirit Parikh to “look at various issues related to implementation of existing guidelines for grant of marketing authorization of market fuels —petrol, diesel and aviation turbine fuel (ATF), identify entry barriers, if any, for expansion of retail outlets for private marketing companies and recommend easing of fuel retailing licensing rules.” On October 23, the government announced major changes in the licensing rules. These include dispensing with the requirement of minimum investment of Rs 2,000 crore in oil or gas infrastructure — in hydrocarbon exploration and production, refining, import terminals, transportation, etc. Henceforth, “the applicant needs to have minimum net-worth of Rs 250 crore and commit to invest...
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Oil sector – is it ready for competition
Last year, the union minister of petroleum and natural gas [MPNG], Dharmendra Pradhan had set up an expert committee under Dr Kirit Parikh to “look at various issues related to implementation of existing guidelines for grant of marketing authorization of market fuels – petrol, diesel and aviation turbine fuel [ATF], identity entry barriers, if any, for expansion of retail outlets for private marketing companies and recommend easing of fuel retailing licensing rules ”. This was in the backdrop of persistent demand from various stakeholders for relaxing extant norms for granting authorization for marketing of oil products with a view to get more private players into retailing so as to increase competition, reduce price, improve services and give more choice to...
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Fuelling new partnerships
India must broaden its vision of oil security which should go beyond increasing indigenous production, to cover arrangements with other nations for assured supplies of crude and gas Despite loud talk by successive Governments about increasing domestic production of oil and gas to make India self-sufficient in energy, we are producing less than 20 per cent of our requirement. The balance, over 80 per cent, continues to be imported. This heightens our vulnerability to a point whereby the slightest disruption in any of the major sources of imports (be it imposition of sanctions by the US against Iran or an attack on oil installations in Saudi Arabia) creates major ripples that have the potential to destabilise the country’s economy. The problem...
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Strategic partnerships for oil security
Despite loud talk for decades by successive governments for increasing domestic production of oil and gas to make India self-sufficient in energy, we are producing less than 20% of our requirement – balance over 80% continues to be imported. This heightens our vulnerability to a point whereby a slight disruption in any of major source of our imports [be it imposition of sanctions by USA against Iran or attack on oil installations in Saudi Arabia] creates ripples and causes a major destabilizing effect on the Indian economy. The problem is not with lack of resources [India has 26 Sedimentary Basins covering an area of 3.14 million sq. km.] but lack of a conducive policy environment besides cumbersome regulatory processes which...
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Promote self-sufficiency
The big bang reforms proposed by the Government for the oil and gas sector are laudable but without a stable and predictable policy environment in place, they can’t make much headway The Union Government is considering far-reaching reforms in the gas sector. These include the setting up of a local gas trading platform to facilitate price discovery, stripping the power sector off its priority status by withdrawing priority allocation of natural gas and hiving off the transportation unit of the Gas Authority of India Limited (GAIL), a public sector undertaking (PSU) which currently holds an overwhelming 75 per cent share of the gas transmission network. The stated objective of these reforms is to enable energy firms to invest in exploration and...
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Gas reforms – holistic approach needed
The Union Cabinet is considering far reaching reforms in the gas sector. These include inter alia setting up of a local gas trading platform to facilitate price discovery, stripping power sector off its priority status in the allocation of domestic natural gas and hiving off the transportation unit of the Gas Authority of India Limited [GAIL] – a public sector undertaking [PSU] which currently holds an overwhelming share of the gas pipeline network. The stated objective of these reforms is to enable energy companies to invest in exploration and development of gas fields in India so as to increase indigenous production and ensure that the country achieves self-sufficiency in this major source of clean energy [currently, 50% of our gas...
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