Petrol Price Hike
There might be another petrol price hike today as per the news. The oil companies — Indian Oil, Hindustan Petroleum and Bharat Petroleum are waiting for the decision from the Central Government regarding the subsidy compensation.
It can be an increase of Rs.3-5, depending upon the compensation amount the Oil companies get (they have asked for Rs. 5000 Crore). As per the companies, they are selling petrol at a loss of Rs.7.65 per litre.
The price of Aviation turbine fuel(Jet fuel), CNG and Auto LPG were hiked yesterday.
Is the petroleum price hike avoidable?
- India has to import 84% of the crude oil it requires. This means that only 16% of the demand is met by the production from Indian soil.
- If the International crude oil prices are high, then the domestic prices are also directly affected.
- Adding to the high oil prices, the rupee depreciation against dollar has made the crude imports costlier.
- Diesel, Kerosene and LPG are given to consumers now at high subsidies. The subsidy amount to be paid by the government to the Public Sector Oil Refining Companies (IOC,HP and BP) will cost the Exchequer around 2 lakh crore/fiscal year.The three oil companies had lost Rs 1,37,524 crore on selling diesel, domestic LPG and kerosene in 2011-12 fiscal.
- These oil firms lose near Rs.670 crore per day on selling the three fuel at rates below cost(current prices).
- The Oil Companies currently lose Rs 16+ per litre on diesel, Rs 32+ per litre on kerosene sold through the public distribution system (PDS) and Rs 570+ per 14.2-kg LPG cylinder supplied to households for cooking purposes ( The amount to be paid by government as subsidies).
Deregulation and Price of Petrol
The government had decontrolled petrol pricing in June 2010 and given oil companies freedom to fix rates at retail level. IOC and its sister state firms Hindustan Petroleum and Bharat Petroleum take average oil price and the exchange rate for the fortnight for deciding on the desired price at the retail level. The companies claim that they are now losing about Rs 7-9 a litre on sale of petrol, even though its pricing was freed from government control.
Deregulation is not on other fuels and the PSUs continue to sell diesel, domestic LPG and kerosene at government dictated price.
Be there deregulation or not, government has nothing much to do to on the petrol price in India. Either the government can keep on giving subsidies to PSUs or hike fuel price, anyway it is again taxpayers money. If the Petrol price is hiked directly, then the burden is directly passed to the end users; that is the only difference.
Another side of the ‘Subsidy vs Price hike’ debate is – The tax payers money from all Indians goes to give subsidy to run the Petrol/Diesel vehicles though the average Indian might not be having one of his own. But if the price hike is directly passed to the consumers, only the end users will pay for the fuel.
How to revert the trend of Fuel Price Hike in India?
Of-course the International issues like a reduction in global crude oil price or gain of indian rupee against dollar should result in fuel price drop in India. What can be done from the government or public apart from this?
Maintenance of proper accounts of profit and loss of the oil companies and strict investigation of their claims is a must. And if the Oil Producing PSUs in India like ONGC or OIL is generating profits, the government should look at a consolidated picture, and if necessary the profits should be shared among these companies with the loss making ones with out passing the burden to people(Government is already doing this). Again, as the Indian tax revenue is not a meager amount, if the sources of leakage and corruption are blocked, the subsidies on fuel can be easily maintained without passing burden to the consumers and causing inflation.The ultimate remedy will be the long term steps with vision on oil production from Indian beds.