By Ravi Srivastava (Ex. Senior Oil Company Executive)
Prime Minister Dr. Manmohan Singh spent his entire tenure in balancing the astronomically high crude oil price and its repercussion on India’s Motor Fuels (Petrol+Diesel) price. Crude Price ruled in the range of 100$/Bbl for nearly a decade.
He did his best to ensure that despite high crude oil price the local Petrol/Diesel Price remains affordable to common man without paralyzing Governments Fiscal deficit.
He gave subsidies whenever needed .So much so that in June 2008 the price of crude oil touched historical peak of 147$/Bbl but the Petrol was available in India for Rs. 51/lt.
PM Modi was born with the shear ‘Luck’, Crude Prices which were hovering around 104$/bbl, when he took the reins of Nation came down crashing to 51$/Bbl and present NDA Government is enjoying the Luxury of stable crude oil prices since last 39 months. Shockingly instead of providing relief to the common man , this Government has preferred to charge Phenomenal Excise Duty, VAT by states and cess making Price of Petrol Rs79/lt & Diesel Rs60/Lt with a marginal variation across states depending upon their VAT. Story begins here, now prices are almost rising every day and by the time you read it may have crossed Rs80/Lt.
I have repeatedly said in my Media Panel Debates and interaction that Petro Pricing has been biggest fraud played on Indian Public by Ministry of Petroleum & Natural gas (MOP&NG), Govt of India which never transparently gives the reason as to why the Petrol costing Rs26/Lt at Refinery gate Price escalates to Rs78/Lt at the nozzle of Retail outlet. Erstwhile NDA Govt. changed the formula of compensating OMC’s (Oil Marketing Companies) from 12% post Tax return to Administered Price Mechanism (APM) in the year 2000.
As a result barring Petrol, Diesel, LPG & Kerosene all Petroleum products were decontrolled. Pricing of such products were left to individual OMCs. Govt. further brought 4 Products under Market determined Price Mechanism (MDPM), however it never happened in practice and continues to be decided by the Babus sitting in Shastri Bhawan MOP&NG and what I jokingly call it remained Minister Determined Price Mechanism (MDPM).
Ironically till date there is not a difference of single paisa in the pricing of Petrol & Diesel and even ATF (Aviation Turbine Fuel) of all 3 OMCs namely Indian oil corporation (IOC), Bharat Petroleum Corporation (BPCL) & Hindustan Petroleum corporation Ltd. (HPCL). Eventually Petrol was deregulated in 2011 & Diesel in 2014. Now only 2 Products LPG & Kerosene are under APM.
Government uses strange logic for increasing price of fuel like crude Price is ruling high, Dollar has appreciated or IPP (Import Price Parity) is high etc. etc, has recently resorted to another Gimmick called DPR (Daily Price revision), since 1st july 2017, consequently in last 2 months alone Petrol Price has shot up by Rs 6.20/lt & diesel Price by Rs 3.70/Lt, By and large it is going up by few paisa every day.
In absence of any trigger neither crude price have gone up nor Rupee has weakened such increase is illogical. MOP&NG has pocketed Rs 20000 cr in last 2 months, with this ‘slow Poison’ called DPR.
Earlier fortnightly Price revision used to create hue & Cry and therefore Govt opted to such practice, surprisingly prices are revised even on Saturday & Sunday while even all National & International Markets are closed.
Petro prices have always been a major source of revenue to the ruling Govts sometimes in late Nineties it used to constitute 66% of the Govt ‘s revenue collection, till higher crude prices made a dent into it. From 2003 till 2011 Govt could mop up barely 1.53 lakh crore from Petro revenue, which has shot up to Rs 3.53 Lakh cr. in a single year 2016-17 only.
Higher Petro Prices are major source of Inflation, be it farmer, Public/Private Transportation resulting into higher commodities and vegetable Prices.
Today consumption of Diesel by Fuel guzzling SUVs is negligible but students, office Goers, Small Businessmen 2 wheeler users are adversely effected by Higher Petrol Prices.
Earlier the logic given by Govt. was that they are subsidizing LPG & Kerosene prices by charging higher Petrol & Diesel Prices which is not the case now. Total subsidy now stands at only Rs. 25000 cr (Rs18000 cr for LPG & Rs 7000cr for Kerosene). By and large Kerosene users are very few and LPG is supplied to total 20cr+ households. Approx 18 cr customer get subsidized LPG while 2 cr get Non subsidized LPG.
The difference in price of Subsidized & Non Subsidized cylinder is barely Rs.100/cylinder. Here also Govt’s claim falls flat that they are subsidizing LPG, whatever small difference is there will be wiped out before March 2018.
Another dope given by Petroleum Ministry is that if Excise duty will be reduced the OMCs will be in Red and incur losses, this is a blatant lie in last 30 years, No oil company has never incurred loss in any Financial year. On the contrary they have posted huge profits, paid hefty Dividends to the Govt being Majority shareholders and they issued Bonus shares too.
All these narratives are just to fool public at large, Governments sole intention is to fill their coffers and every penny is going into burgeoning black hole called ‘Fiscal Deficit’. Excise duties which were Rs, 3.25/Lt & Rs3.50/Lt for Petrol & Diesel respectively in May 2014 have been raised to Rs. 21.50/lt &17.33/lt. Over & above this state govt charges VAT varying from 17.5% to 32% state to state.
It is indeed shocking that Petrol & Diesel both have been deliberately & Purposefully kept out of GST because maximum rate chargeable would have not been more then 28% (Highest slab).
States like Maharashtra are charging a Krishi cess on Petrol to the extent of Rs9/lt, which continues till date though no relief has been provided to farmers and they continue to commit suicide.
In fact Govt. is leveraging the “Inelastic” Nature of fuel demand, a common man has no option but to buy it at any Price available, all 3 OMCs have no competition among themselves means 48000 Govt owned & operated Retail outlets have uniform Price some Private players like Reliance, Essar did make a “guest appearance’ but could not sustain due to poor Logistics, storage & distribution Network.
OMCs are den of corruption, Money is channelized from sales officers to chairmen, for Postings, Transfers and goes up to Ministry. Adulteration, Contracts are major source of corruption, Govt agency NCEAR ( National council of Economic & applied Research) had observed in their report that 40% of subsidized Kerosene goes for adulteration, with rising delta of Price of Kerosne & Petrol being Rs60/=/lt adulteration is a huge business.
You may have not forgotten how then Petroleum Minister Satish Sharma distributed LPG agencies to his Driver, Butler. Scams in ONGC for Rig hiring, Gas theft are in News from time to time.
GSPC (Gujarat State Petroleum Corporation) spent Rs, 20000 cr of Public Money without exploring a Tonne of Gas during the current PM Shri Modi’s tenure as CM of Gujarat. Cost of Products of these companies get inflated due to large scale corruption, to which Govt, is also a Party.
I shudder to think as to what will be situation if International crude prices move upward, though for next 8 quarters it is predicted to be stable. India’s energy security is in shambles, 83% of the crude is imported, sometimes in late Eighties our dependence on Imported crude was to the extent of only 50%, however rising demand could never keep pace with production, ONGC, OIL (Oil India Limited) the 2 Govt. explorers have their production totally stagnant and have not added even a 1 Million Tonne extra production in last 3 decades, therefore huge amount of Foreign Exchange is drained for buying crude.
Though these PSUs have done relatively better in case of Gas Production where 50% of the demand of 23 Mmt is being met by Indigenous production.
Dealers/Retailers are another screwed lot in this pricing game, Owning a Retail outlet or Petrol Pump was a matter of Pride till 15 years before, now it has become liability, they get a meager commission of Rs.0.66 /Lt on Petrol & Rs 0.51 /Lt on Diesel (Highest slab) which barely suffice administrative expenses, over and above this Daily price revision has broken their Back.
Tank Truck with Product leaves Company Depots at one price and arrives Retail Outlet at a different price they suffer Inventory losses over and above OMCs expect them to maintain ‘Spic& Span’ Toilets too with this paltry commission.
All petrol Pumps who are unable to sell 150 Kilolitres of Motor Fuel (Diesel/Petrol) in a month are running huge losses, In urban cities they are holding business only for their Land, else they will surrender Petrol Pumps any time.
There is an urgent need to lower Excise Duties & bring fuel under VAT, which will curb Inflation and will give desired boost to the economy and relief to common man, States must reduce VAT and unproductive cess, the myth created by some Ministers or PM that surge in revenues from Oil sector is used for Social reforms, is a hoax, Contrary Govt has cut budget for Health & Education. Roads built in last 3 years are barely 8KM/day against ambitious target of 20KM/day boasted by Surface transport Minister.
Recently Petroleum minister Sh. Dharmendra Pradhan has been elevated as cabinet Minister just for his ability to raise more & more money from Oil sector. Public is crying under the weight of exorbitant fuels prices, which has hurt every stakeholder, consumer, Industry and Dealers.
Selling of HPCL to ONGC is another gimmick by the govt this is nothing but synergy of Incompetent and inefficient corporates in Up stream & Down stream.
In the whole process only Govt is benefitted by pocketing cool Rs 30000 cr by killing one independently operating Oil company. ONGC is a corporate who does not know the word ‘customer’, till 2 decades back they were Oil & Natural Gas commission they could never overcome the ‘commission’ mentality.
Govt is also misusing its brute Majority in Parliament to enjoy this loot forgetting the same very ruling party used to descend on streets even for Rs1/Lt rise in Petrol Price or Rs50/Cyl while in opposition.
Today opposition is fragmented, unable to raise voice against this daylight robbery, and the victim is public at large suffering through “Boiling Frog Syndrome” who will ultimately succumb to this arm twisting, barring a few public spirited Media channels, Majority of Media have opted for “Mute” Mode on this burning issue.