Why oil companies in India hike petrol price so frequently?

The public sector oil companies have increased the price of petrol by 33 paise. This follows an increase in October of 70 to 72 paise per litre and September of 27 paise per litre. By deregulating the petrol pricing during June this year, the government has opened the way for successive hikes in petrol prices. The rise in petrol prices will further fuel inflation. The people who are suffering from continuous food inflation will be more burdened. There is no transparency in the pricing decision making.

The Government advertisement says India imports petroleum products. India imports crude oil, it does not import petroleum products. Crude oil is refined in the refineries in India to produce petroleum products like petrol, diesel cooking gas, kerosene etc. before marketing. India imports 75 to 80 per cent of its crude oil requirements. However India is more than self sufficient in oil refining and produces more petroleum products than the domestic requirements. In the year 2009 – 2010 (April-December) it has exported 28 million tonnes petroleum products against an import of 10 million tonnes.

Let us see what the Petroleum Ministry says in its annual report of 2009-10 on Indian Oil Corporation (IOC), the major public sector Oil Marketing Company (OMC):

“During 2008-09, IOC posted net profit of Rs. 2,950 crore on an unprecedented turnover of Rs. 2,85,337 crore that too after holding the price line for the four major products – petrol, diesel, PDS kerosene and LPG for domestic use. IOC is also the first and the highest ranked Indian company in the Fortune `Global 500’, placed at 116th position by sales in 2008. It is the 18^th largest petroleum company in the world. The profit (after tax) for the year 2009-10 (upto December 2009) is Rs.4663.78 crore, whereas the turnover for the said period is Rs.208289.46 crore”.

Further, as per the Audited Financial Results for the year ending 31.3.2010 IOC’s net profit has been shown as Rs.10,998 crore with a reserve and surplus of Rs.49,472 crore. The Other two marketing companies HPC and BPC have earned profits of Rs. 544 crore and Rs. 834 crore during April-December, 2009.

About deregulation of petrol prices

Suppose a pair of shoes is made in Italy which costs 1000 rupees. Suppose India imports the Italian leather but makes the shoes, including the cost of Italian leather, at a much cheaper cost, of just 600 rupees. Suppose the company says that you have to pay 1000 rupees in India because that is the import parity price otherwise the company will suffer an under recovery of 400 rupees! Will you not protest about a notional calculation on the basis of the Italian cost not the Indian cost? 

But that is exactly what the Government is doing. It is making the unchecked international price of petroleum products as its base to calculate what the price should be charged in India! The oil companies are making a profit even after absorbing the subsidies for cheaper pricing of petrol products through the APM. But the bogey and myth of under recoveries is being used as the excuse to hike the prices. Under the cover of under recoveries, we are back to the decontrolled pricing regime based on import parity, when foreign oil companies were operating in the country.

After 2002, the private sector and domestic companies like Reliance and Essar wanted further deregulation. They were not satisfied with the steps taken by the BJP Government. The Kirit Parikh committee was set up precisely to address the demands of the private sector. This committee gave a report for complete deregulation of petrol

products. The present step of the central Government goes further than even the BJP Government and accepts the recommendations of the Kirit Parikh committee to reintroduce import parity pricing through deregulation, in the first instance of petrol.

Thus people of India are left at the mercy of the market.

Enthedi Enthedi Panamkiliye...

Big contracts for Obama...

US President Barack Obama has announced $10bn (£6.2bn) in new trade deals with India. He was speaking in Mumbai at the start of a 10-day Asian tour designed to boost US exports and create jobs.

Some of the deals included:

• The sale by Boeing of 30 new 737 aircraft to private Indian airline SpiceJet. The White House says this will help support over 12,000 US jobs.
• Preliminary agreement had been reached on the Indian purchase of 10 Boeing C-17s military transport planes.
• The sale by GE of fighter 107 F414 jet engines to the Indian military.
• A separate deal with GE worth $500m (£309m) for the sale of six heavy duty gas turbines and three steam turbines to India's Reliance Energy Ltd.
• Harley-Davidson plans a new plant in India to assemble American-made motorcycle kits.
• The White House said India had identified GE subsidiary GE Transportation, based in Erie, Pennsylvania, and Electro-Motive Diesel, of LaGrange, Illinois, a unit of Caterpillar Inc, as bidders to supply Indian railways with over 1,000 diesel locomotives over 10 years.

The deals for new export business with India would help to support around 54,000 jobs in the United States.

OBAMA BEGINS HIS “BUSINESS TOUR” TO INDIA

After his ‘shellacking’ in the mid-  term polls, Barack Obama could boast of some good business deals in India. India Inc seems to be buying into President Obama’s ‘win-win’ mantra.

Obama yesterday announced that “several landmark” deals worth $10 billion (nearly Rs. 44,000 crore) have been reached between the two countries for creating about 50,000 jobs in the US.

“Boeing is going to sell dozens of planes to India and GE is going to sell hundreds of electric engines. The deals are worth USD 10 billion and will create more than 50,000 jobs in the US,” President Obama said.

Among the deals, SpiceJet has purchased thirty 737-800 aircraft with a total cost of $2.8 billion from Boeing and the Anil Dhirubhai Ambani Group purchased power equipment for 2,400 MW plants from GE for $2 billion.

Obama’s visit is against the backdrop of electoral reverses on top of economic difficulties, including a high unemployment percentage, 9.6 percent in October.

The US accounts for about 60 per cent of India’s about $60 billion IT and IT-enabled services exports. But the reality, President Obama said, was that jobs were being created in both the countries and said India was emerging as one of the fastest markets in the world with one of the largest workforce.

India-US trade stood at US $36.5 billion in 2009-10 fiscal and the two countries aim to double trade in the next five years. Describing India, which receives about 8 per cent of its total foreign direct investment from the US, as a defining and indispensable partner of the 21st century, President Obama asked India to reduce trade barriers, while committing to reciprocate. He is looking forward to a steady reduction in barriers to trade and foreign investments from agriculture to infrastructure, from retail to telecom.