Category: Pricing Policies & Subsidies

The US has imposed a fresh round of sanctions on Russia’s energy sector in a bid to cut its oil revenue. The crucial question remains: Will these measures be effective On January 10, 2024, the outgoing Biden administration of the United States of America (USA) made public its latest round of sanctions on Russia aimed at cutting the latter’s income from energy sales. These sanctions seek to target two large producers, as well as insurers, traders and more than 180 vessels carrying Russian oil. The US Office of Foreign Assets Control – the agency tasked with enforcement of the sanctions – has set a deadline of February 27, 2024, for the delivery of all crude cargoes that were loaded on...

As state-owned oil companies grapple with massive losses from selling LPG below cost, the Govt is set to allocate Rs 35,000 crore in subsidies to mitigate the financial burden During the current financial year (FY) 2024-25, the state-owned Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) are expected to incur an under-recovery of Rs 19,550 crore, Rs 10,400 crore and Rs 10,570 crore respectively on sales of LPG to household consumers. To make up for this loss totalling Rs 40,500 crore, the Union Government is likely to provide a subsidy of Rs 35,000 crore. In the Budget for 2025-26, to be presented on February 1, 2025, Finance Minister Nirmala Sitharaman will make...

Government’s decision to grant a 20 per cent premium on natural gas from the state owned new wells has added complexity to the gas pricing regime The decision of the Union Government to grant a 20 per cent premium over the APM price (a jargon for administered or controlled price) for any natural gas (NG) that state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) will produce from the ‘new wells or well interventions’ from their nominated fields has made the NG pricing more complicated. It is an outcome of a thought process that focuses on unshackling the oil and gas industry from price controls to start with but ends up exercising more controls. Every year, India...

In a globally interdependent world, actions that severely restrict the flow of goods and services across national boundaries are bound to be counter-productive In a bid to punish Russia for its military action against Ukraine, in June 2022, leaders of G7 viz., the United States, Germany, France, Britain, Italy, Canada and Japan had vowed to explore the feasibility of measures to bar imports of Russian oil at price above a certain level. In September 2022, their finance ministers (FMs) said: “We confirm our joint political intention to finalise and implement a comprehensive prohibition of services, which enable maritime transportation of Russian-origin crude oil and petroleum products globally. Providing those services would only be allowed if the oil and petroleum products...

The price cut especially for non-ujjwala beneficiaries was avoidable. It will serve no purpose and will be a drain on already strained oil companies For several decades, it has been a common practice for governments to make decisions based on political expediency ignoring economic considerations. The incumbent Modi – dispensation has tried to change this practice but he too has fallen back to business as usual. One such area is the LPG subsidy. On August 29, 2023, the Union Cabinet approved a reduction in the price of domestic cooking gas by Rs 200 per cylinder (14.2 kg) effective from August 30, 2023. De jure, the price of LPG is deregulated. How could the government decide on it? The reason is...