Currently, E&P firms are allowed to sell their crude at parity with its international price To deal with the fuel crisis, recently the Modi government has deregulated sale of domestically-produced crude oil; and imposed a cess, or windfall tax, of Rs 23,250 per tonne on crude oil and a special additional excise duty (SAED) of Rs 6 per litre. and Rs 13 per litre on exports of petrol and diesel respectively. On July 20, the SAED on petrol was removed and on diesel was cut to Rs 11 per litre. On on one hand, it expects exploration and production (E&P) companies like Oil India Limited (OIL), Oil and Natural Gas Corporation (ONGC), and Cairn Oil and Gas to increase the...
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Category: Administered pricing regime (APR)
Hydrocarbons may give India energy freedom
Windfall tax on oil firms is justified; a robust ecosystem for hydrocarbons can give India the much-needed relief Amid disruption in the global supply chain and steep spike in the international crude prices, the Union Cabinet last week took two major decisions pertaining to the oil sector—deregulation of the sale of domestically-produced crude oil and imposing a cess or windfall tax of Rs 23,250 per tonne on crude oil and a special additional excise duty (SAED) of Rs 6 per litre, Rs 13 per litre and Rs 6 per litre on exports of petrol, diesel, and jet fuel respectively. The Covid-19 pandemic and the ongoing Russia-Ukraine war have acutely affected the global supply chains, besides giving legs to the prices...
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Self – reliance in gas – way forward
Delivering the 75th Independence Day (ID) address on August 15, 2021, Prime Minister, Narendra Modi set the country a target of 2047 – to achieve self-reliance in energy production through a mix of electric mobility, gas-based economy and making the country a hub for hydrogen production. While, electric mobility and hydrogen are futuristic areas, as regards gas-based economy, pursuit of this goal will involve increase in gas consumption to (i) meet additional energy needs for sustaining high growth and (ii) replacing polluting fuels such as coal, fuel oil etc. This could result in further increasing dependence on gas import which is already high at 50%. To prevent this and put India on the path of self-reliance, there is need for a...
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Sun-set on LPG subsidy
From June, 2020, the Union Government stopped depositing LPG (liquefied petroleum gas) subsidy in the accounts of eligible beneficiaries and the position continues till date. Even as the budget for 2021-22 has provided for Rs 14,000 crore under this head (down from Rs 36,000 crore during 2020-21), it is unlikely that any payments will be made during the current year. What has prompted this move? Was it orchestrated but put into effect only now? To understand, let us reflect on some basic facts. Since January 1, 2015, Modi – Government has been running a scheme for direct benefit transfer (DBT) of LPG. Nicknamed PAHAL (Pratyaksha Hastaantarit Laabh), under it, three major oil marketing PSUs viz. Indian Oil Corporation Limited (IOCL),...
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Gas pricing – make a clear choice
The state-owned Oil and Natural Gas Corporation (ONGC) is forming a new wholly-owned subsidiary company with the objective of sourcing, marketing and trading of natural gas, liquefied natural gas (LNG) business, gas to power business and so on. The company is already into exploration and production of gas (besides crude oil) which it sells to a variety of users viz. fertilizers, power, chemicals and petrochemicals, CNG, gas for household consumption etc. What has prompted it to set up a separate company solely for the purpose of trading and marketing of gas? It is not a simple case of business restructuring; instead it is an attempt to circumvent control on price of gas imposed by the Union Government. To see how...
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Stop the flip-flop
The policy drift on gas pricing must stop. The November 2014 norms provide a robust system of gas pricing which balances the interests of both the producers and consumers The Narendra Modi Government is keen to promote the use of gas and support it by increasing domestic production. But it wants to keep the gas price low so that it is affordable to key sectors, such as fertilisers and power producers, and is in sync with the macro objectives of keeping subsidy payments and fiscal deficit under check. This overarching objective is glossed over when it comes to pricing, even as the Centre is obsessed with giving a higher price to exploration and production (E&P) companies. Under the November 2014 guidelines for...
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Uniform transport tariff for gas – a flawed idea
Speaking at the launch of nation”s maiden online gas trading platform by Indian Gas Exchange (IGX), union minister for petroleum and natural gas (MPNG), Dharmendra Pradhan reiterated the commitment of Modi –government to raise the share of natural gas in the energy basket from existing around 6% to 15% by 2030 in sync with its avowed objective of promoting use of environment friendly fuel. Pradhan also alluded to ‘a new pipeline tariff policy that will replace existing practice of seven different pipeline operators charging separate rates and customers away from gas source paying more than those nearer to source’. The Chairman, Petroleum and Natural Gas Regulatory Board (PNGRB), Dinesh Kumar Sarraf was more specific when he hinted at ‘single rate...
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Fuel prices are burning
We have an abhorrent situation whereby taxes alone account for about two-third of the price at the pump. The high fuel price contributes to high inflation and higher costs of fertilisers and food During the last three weeks of June, the oil marketing public sector undertakings (PSUs), namely the Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL), increased the retail prices of petrol and diesel continuously almost daily. The cumulative hike works out to about Rs 9 per litre of petrol and Rs 11 per litre in case of diesel. As a result, the current price of both the fuels in Delhi is Rs 80.5 per litre. In April/May, petrol was selling at Rs...
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Oil and gas – don’t fiddle with formula-based pricing
India depends on imports for about 83% of its crude oil and 50% of gas requirement. Considering the huge quantities involved, the price at which these products are imported has a potent effect on the health of the economy by impacting the twin deficits viz. current account deficit [CAD] and the fiscal deficit [FD] and other related parameters such as inflation, interest rate, borrowing cost etc. Therefore, all stakeholders including the government – both Centre and states – always pray for reduction in their prices. The steep reduction price of crude from over US$ 70 per barrel at the start of 2020 to around US$ 35 per barrel currently [on April 22, it even went below US$ 20 per barrel] and...
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What India should do when oil prices have crashed
With crude price low, the govt should think of moving completely to DBT for food, fertiliser and power. Crude oil plummeted to less than US$ 30 per barrel – drop of 50% over its level in the beginning of 2020. ————————————————————— Much before Covid 19 had assumed monstrous dimensions, the international crude oil market was already oversupplied. Then, OPEC and non-OPEC suppliers failed to reach an agreement as Russia refused to back even a moderate cut. In sync with its past behaviour under similar circumstances (1997, 2015), Saudi Arabia pumped additional supplies prompting tit-for-tat by Russia. As a result, crude oil plummeted to less than US $30 per barrel – drop of 50% over its level in the beginning of...
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