FUEL PRICE HIKE IN INDIA- Mikul Patel

Trend The price hike is

almost continuous. The rate has

increase after 2010.

The increase in petrol prices is more than others.

Since the advent of CNG, the rate of increase has been controlled to a certain extent.Delhi Fuel Price Hike

Chart

CAUSES

Economic Reasons Supply and demand imbalances :

~40% of merchandise imports Depriciation of Indian Rupee

Vicious cycle Subsidies

Black Marketing

Deregulation of petrol after 2010

Rise in price of crude oil

Taxation

Political Reasons Rejection of India’s call by OPEC for

regulating crude prices through a price band

Unsolved present issue of payment with Iran, India’s second crude oil supplier

Absence of reforms to regulate automotive sector

Huge tax revenues from import of crude oil

Social Reasons Increase in number of vehicles

Use of vehicles even for short distances

Huge loss of fuel due to keeping engines on at traffic

Poor R&D in automotive sector. Causes of fuel price rise in India 

Crude Oil Refining Petrol Refining Margin

Transportation

Vendor Commissi

on

Production cost of

Petrol

Hoax of Petrol Subsidy

1 barrel of crude oil yields 150 litre of petrol.

1 US Dollar = Rs. 62 (as on 28th Feb 2014). Average price of 1 barrel of crude oil =

95.46 USD = Rs.

(95.46 x 62) = Rs. 5890

Refining, transportation, commission per barrel = Rs. 786

Production cost of 150 litre petrol = Rs. 5890 + Rs. 786

= Rs.6676 Production cost of 1 litre petrol = Rs. 44

Rs. 44

IMPACTS

GOVERNMENT BUDGET

If fuel prices are hiked:

Benefits central and state governments.

The Centre has a lower subsidy to pay out, but state governments' tax revenues on fuel also go up. Revenues that states earned from oil sector were Rs 126,512 crore in 2012-13, far above the subsidy paid to oil companies.

If prices remain same:

The petroleum subsidy is set to rise, though again it is worth noting that governments have usually earned more from the petroleum sector than they pay in subsidies to it.

OIL COMPANIES

If fuel prices are hiked:

As of September 1, oil marketing companies have reported an underrecovery, of Rs 12.12 per litre of diesel sold.

A significant hike could reduce that amount.

If prices remain same:

Under-recoveries will rise though the actual loss faced by oil companies is unclear.

But PSU oil companies will face a liquidity crunch and will be forced to raise short-term borrowings.

Political Impact National Strikes Escape clause for rise in subsidy

Automobile Sector Diesel vs Petrol cars Decrease in car sales

“Annual car sales declined for the first time in 11 years in 2013 posting a 10 per cent decline to 18.07 lakh units. ”

Inflation

Rough estimates show that a ten percent rise in the price of diesel (around Rs 5 per litre in Delhi) will raise inflation rates by 0.6 percentage points.

Future

Our Role Public Transport Bicycles Alternatives

Summary Trend Reasons

Economic Political Social

Hoax of Subsidy Impacts

Govt budget Oil Companies Politics Automobiles Inflation

Future Our Role

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