Why is petrol price in India higher than neighbouring countries?

Discussion in 'Economy & Infrastructure' started by ankur26888, May 25, 2012.

  1. ankur26888

    ankur26888 Regular Member

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    One will be better-off if one buyspetrol from one’s neighbouringcountry. The petrol price in terms ofINR/litre is nearly half in Bangladesh,Pakistan and China. Even USA, one ofthe most developed countries, keepsits petrol price half of India’s. Why is itso?

    A senior manager of a PSU oilcompany added, “The retail sellingprice is calculated by adding customsduty, central excise rates, and VAT tothe basic price, which is the averageinternational oil rate. Around INR27.26of INR68.64 petrol price in Delhi isbecause of central and stategovernment taxes. The price of petrolwithout any taxes at the refining gateis around INR41.38 per litre.”During a Lok Sabha debate in 2008,Dinisha Patel, Minister of State in theMinistry of Petroleum and Natural Gaswhen talking about the taxes onpetrol in Delhi claimed that 53% ofpetrol price came from taxes (around32% of petrol price is excise duty, 4%customs duty and 17% sales tax).1/6 th of the Centre’s tax revenueis collected from petroleumproducts

    Petroleum is a safe source of taxbecause we are bound to use fueland that is reflected in the increasingtrend of tax realisation from 2005-06to 2009-10. Jaipal Reddy, UnionMinister of Petroleum and NaturalGas, admitted that petroleum is amajor source of the government’srevenue. That is why the governmentis not able to cut down the oil tax tojustify the oil price. The governmenthas huge welfare expenditure and tomeet that it needs revenue.Excise duty and customs duty aretaken by the Centre. The totalrealisation from petroleum productswas INR71,766 crore in 2009-10. Thisis 15.71 % or nearly one sixth ofCentre’s tax revenue in 2009-10.States are also not lagging behind incollecting tax on petroleum products.Sales tax or Vat is collected by them.The recent price rise in petrol createda stir in the states. Mamata Banerjee,the Chief Minister of West Bengal,requested the Prime Minister toreduce petrol price to give relief to thecommon man. But it is interestingthat for every rupee spent on petrolprice in West Bengal, the stateexchequer receives 26.91 paisa. It iseven more interesting that PrimeMinister Manmohan Singh expressedhis helplessness and advocated petrolprice decontrolling. He simply passedthe ball on to the Oil MarketingCompanies’ (OMCs) court. Duringthese debates the issue of givingsubsidy has come up. But none of thepoliticians mentioned the high taxrate.

    Many economists believe that whilethe international oil prices fell recently,the oil companies did not reduceprices. Dr. Kirit Parikh, Chairman of theexpert committee on pricing ofpetroleum products said, “It shouldbe very transparent. When oil price inthe world market goes up or theIndian rupee is devalued, your cost inrupee term of imported crude alsogoes up. Then you would certainlyraise the price of petrol.Correspondingly, if it goes down weshould come down. But we shouldhave that flexibility.”
     
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  3. ankur26888

    ankur26888 Regular Member

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    India’s crude oil import price fallsbelow $100/barrelA cut in petrol and diesel prices maynot be economically feasible as IndianOil, Bharat Petroleum and HindustanPetroleum are projected to loseRs1,65,300 crore on fuel sales thisfiscal..

    India’s crude oil importprice has dropped to below $100 abarrel, first time since April, but a cutin domestic retail prices is a distantpossibility given the fact that state-runoil firms are still losing money on fuelsales.

    The basket of crude oil India importsaveraged $99 a barrel on Tuesday, thelowest level since 2 April, a PetroleumMinistry official said.It had averaged $96.52 a barrel on 1April and crossed the $100 mark on 7April.

    “The Indian basket of crude oil islower than the $119 -120 level atwhich the 4 June price hike wasannounced. But even at current levels,companies are still losing money onsale of petrol, diesel, LPG andkerosene,” he said.

    A cut in petrol and diesel prices maynot be economically feasible as IndianOil, Bharat Petroleum and HindustanPetroleum are projected to loseRs1,65,300 crore on fuel sales thisfiscal.

    “The government has to make goodhalf of this revenue loss by issue of oilbonds. The Finance Ministry hasalready taken an over Rs22,000 crorehit in revenues by way of duty cutsannounced in June and a pricereduction at this stage may upset itsapplecart,” the official said.Retailers are at present losing Rs6.31per litre on petrol, Rs13.69 on diesel,Rs. 31.39on kerosene and Rs312.58per 14.2kg LPG cylinder.

    IOC, BPCL and HPCL together arelosing about Rs400 crore per day onfuel sales, he said, adding that thedomestic prices are pegged at $68 perbarrel crude price.The official said the Indian basket ofcrude oil has averaged $103.33 perbarrel, against $113.05 a barrelaverage of August.

    The revenue loss of retailers has to becompensated through a combinationof oil bonds and assistance fromupstream firms like ONGC.

    IOC, the company that controls about54% of the market, is projected to loseRs90,630 crore on fuel sales this fiscal.The company loses Rs11 crore perday on sale of petrol, Rs112 croredaily on sale of diesel, Rs63 crore perday on kerosene and Rs32 crore perday on LPG.

    Fuel prices in India are pegged at $68per barrel, much lower than $99 abarrel price of 9 September.
     
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  4. Ray

    Ray The Chairman Defence Professionals Moderator

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    Because India has many populist schemes which the others don't have.

    These schemes require money to keep it going inspite of corruption. Because of corruption to show some results, a large sum has to be ploughed in.

    Therefore, it is ideal to hang the petrol user since they comprise of a marginal outflow in votes.

    Diesel is what is for the farmers and poor, as also to keep goods transportation cheap with its positive spinoff on prices of commodities.

    K Oil? It is a no no. The 'poor' will be badly hit. Not that they use it for themselves, but sell it on the blackmarket since that is more remunerative!

    Populism is the dharma.

    However, there is nothing wrong in having foodgrains rot becasue there is a lack of storage space - a phenomenon that has been there ever since time began for Independent India!
     
    Last edited: May 25, 2012
  5. satish007

    satish007 Senior Member Senior Member

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    Because CCP need a example to show their petrol price is not highest to quite Chinese.
     
  6. Ray

    Ray The Chairman Defence Professionals Moderator

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    What is the cost of petrol in China (in terms of Indian :inr: / litre?
     

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