Category: Pricing Policies & Subsidies

Oil retailing – end PSUs monopoly

At the current juncture, when the economy is battling the consequences of the steep increase in the international price of crude [India depends on imports for over 80% of its oil requirements] and there is an urgent need to mitigate the adverse effects, logically the focus has to shift to explore all potential areas for cost reduction. An important area relates to enticing private sector in marketing of petroleum products which today is the monopoly of public sector undertakings [PSUs]. The infrastructure for storage, handling, import terminals, transportation, marketing and distribution of petrol, diesel, LPG, kerosene etc is dominated by oil PSUs viz. Indian Oil Corporation Limited [IOCL], Bharat Petroleum Corporation Limited [BPCL] and Hindustan Petroleum Corporation Limited [HPCL]. Out of...
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Urgent need for ‘responsible’ oil pricing

Interacting with global leaders from the energy sector that included ministers of Saudi Arabia and UAE – prominent members of OPEC [Organization of Petroleum Exporting Countries] –  besides CEOs of leading MNCs on October 15, 2018 in New Delhi, prime minister, Narendra Modi flagged three major issues:- First, expressing concern over the steep increase in the international price of crude oil [and concomitant increase in prices of all petroleum products viz. diesel, petrol, ATF, LPG etc], he urged all leading producers/exporters to be more responsible in fixing the price to bring it down from current high to reasonable level. Second, keeping in mind the overarching need to increase domestic production India, he asked them to consider investing in exploration and...
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Fuel woes – CED cut could be catastrophic

With the petrol and diesel prices crossing a new landmark of Rs 80 per litre and Rs 70 per liter [in Delhi], there is a big hue and cry in political circles. The sharks prowling for an opportunity to lambast Modi – government are demanding a steep cut in the central excise duty [CED] to enable corresponding reduction in the price to consumers. They argue that during the last 4 years, the centre allegedly mopped Rs 1100,000 crore from increase in CED. A portion of this money could be used to giver relief, they contend. The international price of crude had declined from US$ 117 per barrel in November 2014 to US$ 28 per barrel in January 2016. Leveraging this,...
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Shun differential pricing of gas

Prime Minister Narendra Modi has set an ambitious target of cutting India’s import dependence for oil from existing around 80% to 67% by 2022 and further down to 50% by 2030. To meet the target, his government has taken several initiatives to create a conducive ‘policy’ and ‘regulatory’ environment for boosting domestic production of hydrocarbons. A path-breaking policy initiative was introduction in July, 2017 of the Hydrocarbon Exploration and Licensing Policy [HELP] in place of the subsisting New Exploration and Licensing Policy [NELP] that was launched in 1999. Also dubbed as Open Acreage Licensing Policy [OALP], under HELP, bidders can get a single license for exploration and production of conventional hydrocarbons such as oil, natural gas as well as unconventional including shale...
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Fuel price reduction: the ball is in the states’ court

The steep increase in the prices of petrol and diesel, by over Rs 3.5 per litre each, after the assembly elections in Karnataka has yet again built up pressure on the Narendra Modi government to reduce excise duty on fuel. Between November 2014 and January 2016, excise duty on petrol went up from Rs 9.48 per litre to Rs 21.48 per litre; on diesel, the increase was even sharper, from Rs 3.56 per litre to Rs 17.33 a litre. That coincided with a steep decline in the international price of crude oil from $117 per barrel in November 2014 to a low of $27 per barrel in January 2016. Thereafter, crude price moved up gradually to $40 per barrel by...
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Fuel worries – the ball is in state court

The steep increase in the prices of petrol and diesel by over Rs 3 per liter each post the assembly elections in Karnataka since May 14, 2018 [currently, these are Rs 78 per liter and Rs 69 per liter respectively in Delhi] has yet again led to build up of unprecedented pressure on Modi – government to reduce the excise duty [ED]. Between November 2014 and January 2016, ED on petrol went up from Rs 9.48 per liter to Rs 21.48 per liter or 2.26 times, whereas on diesel, the increase was even sharper from Rs 3.56 per liter to Rs 17.33 a liter – almost 5 times. That coincided with steep decline in the international price of crude oil...
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ACHIEVING SELF-RELIANCE IN OIL AND GAS

For fresh exploration efforts — in both conventional and unconventional hydrocarbons — the emerging policy and regulatory environment is conducive. However, Team Modi needs to walk an extra mile to reduce regulatory hurdles for existing operators under production sharing contracts A hike in the price of crude oil (courtesy, the US’s decision to reimpose sanctions against Iran and output decline in Venezuela) has drawn the attention to India’s dependence on oil import, which currently  stands at 83 per cent, to meet its energy requirement. This, due to a lack of a conducive policy and regulatory environment that came in the way of boosting domestic exploration and production efforts so far. Until the late 1990s, exploration and production of oil and gas used...
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Self-reliance in oil and gas – HELP could be a game-changer

The current steep hike in the international price of crude oil [courtesy, re-imposition of US sanction against Iran and increasing global demand] has once again drawn attention to India’s unconscionably high level of dependence at 83% on import for meeting its energy requirement. This also brings in to focus the commitment of Modi to increase the share of domestic production by 10% in 5 years. Domestic supply – ‘precariously’ low There would have been some consolation if India did not have the resources to support the demand. But, despite the country having abundant resource and seven decades after independence, the domestic production of oil continues to languish at about 15-20% of the requirement. This is entirely due to lack of...
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HAS GOVERNMENT RUN OUT OF OPTIONS?

GST Council — the all powerful body that considers changes in the tax structure/rate — should consider inclusion of oil and gas products in the GST, putting them under the 18 per cent slab with the aim of eventually shifting them to the 12 per cent slab Some time back, three public sector undertakings (PSU) in the downstream oil segment viz Indian Oil Corporation (IOCL), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) were reportedly directed not to hike the price of petrol and diesel by one rupee a litre each that had become necessary due to an increase in the international price of these products. The prices of these products were decontrolled (petrol in June 2010...
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Oil price puzzle – has government run out of options?

Reportedly, the three public sector undertakings [PSUs] in the downstream oil segment viz. Indian Oil Corporation [IOCL], Hindustan Petroleum Corporation Limited [HPCL] and Bharat Petroleum Corporation Limited [BPCL] were directed not to give effect to hike in price of petrol and diesel by Rs 1 a liter each that had become necessary due to increase in the international price of these products. The prices of these products were decontrolled, petrol in June 2010 and diesel in November 2014 and since then, the oil PSUs set their prices on the basis of movement in their international price [using import parity price and export parity price in the 90:10 ratio]. Whereas, up to May 31, 2017, these were revised fortnightly, from June...
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