So, with yet another hike in petrol prices, it’s becoming imperative that we understand the rationale behind the petrol pricing in India. And that too, when the case that all oil companies are actually the highest profit grosser of the country. Look through any oil company balance sheet or income statement and you will wonder why they cry so much over the supposed losses they are making! In fact, ONGC topped the list of highest profit earning company in the year 2012. You can see that all the oil companies actually figure in the list by googling the same.
So, before I go on with all my calculations and show you how we are being fooled by this country’s govt., let me tell you what the Indian Govt. is doing in a very simple way. They say they are giving subsidies. And hence the petrol price is lower than what it should have been. Now, if you just look into the break up of petrol pricing, 45% of it is taxes. So, if you are lucky and live in Delhi(Ask for raise if you are living somewhere else! Or at least a petrol allowance!), where the petrol price, for the sake of simpler calculations, is say, Rs, 71. So, Rs 32 of that is actually Taxes! So, they are charging Rs 32 above what they should charge! Today’s Brent crude oil price is $ 107 per barrel and India actually gets it at 5-7% discount a barrel since it buys in bulk. Now, a barrel produces about 150 liters of oil, so price per liter would be around Rs. 44.55, discount not being taken into account and rupees at 62 a dollar, which again is high since most of the prices are protected by price hikes with the use of futures. And even the petrol companies say the cost of refining, customs and transportation, on a per liter basis, is at most RS, 3. So, the real cost, taking the higher range of everything is Rs. 48 only! Where is the subsidy the govt. is talking about??? This is my big question!
And they say that Govt. cannot subsidize the rich! Really? Who is paying all these taxes? And I am not even talking about all those other taxes that the govt. is charging. This is the unkindest cut of all! As we saw just now, at the cost price of Rs. 48 per liter and a selling price of Rs. 71.0 per liter, (who is subsidizing whom? After the latest hike, the total taxes work out to whopping 43% to 60% (in Different States) on the basic price! How much more will this Govt add on the common man’s back? Till it breaks, I guess!
At this price, even diesel is NOT a subsidized product as the cost is exactly the same at Rs. 48 per liter for Diesel (the refining process yields all final products at almost same cost!), which is sold at Rs. 56-61 per liter! So, they should spare us these bullshits on “Govt. subsidizing the rich for their cars and two wheelers!” an d if they do not want to subsidize, they should not! It’s simple. Why go through the convoluted path of shielding consumers from price hikes and falls (And that too, as we have seen, is a gross lie), absorb that loss from the oil marketing companies(Since they are, in reality, making huge, huge profits!) and ultimately put that back on India’s national budget which again is coming from the tax money? And in the process, taxing this heavily!
This is a big hypocrisy, one of the many by this Indian Govt. In fact, if we look at the petrol prices at Purchasing Power Parity, we are paying the highest! Talk of being subsidized!
So, before I go on with all my calculations and show you how we are being fooled by this country’s govt., let me tell you what the Indian Govt. is doing in a very simple way. They say they are giving subsidies. And hence the petrol price is lower than what it should have been. Now, if you just look into the break up of petrol pricing, 45% of it is taxes. So, if you are lucky and live in Delhi(Ask for raise if you are living somewhere else! Or at least a petrol allowance!), where the petrol price, for the sake of simpler calculations, is say, Rs, 71. So, Rs 32 of that is actually Taxes! So, they are charging Rs 32 above what they should charge! Today’s Brent crude oil price is $ 107 per barrel and India actually gets it at 5-7% discount a barrel since it buys in bulk. Now, a barrel produces about 150 liters of oil, so price per liter would be around Rs. 44.55, discount not being taken into account and rupees at 62 a dollar, which again is high since most of the prices are protected by price hikes with the use of futures. And even the petrol companies say the cost of refining, customs and transportation, on a per liter basis, is at most RS, 3. So, the real cost, taking the higher range of everything is Rs. 48 only! Where is the subsidy the govt. is talking about??? This is my big question!
And they say that Govt. cannot subsidize the rich! Really? Who is paying all these taxes? And I am not even talking about all those other taxes that the govt. is charging. This is the unkindest cut of all! As we saw just now, at the cost price of Rs. 48 per liter and a selling price of Rs. 71.0 per liter, (who is subsidizing whom? After the latest hike, the total taxes work out to whopping 43% to 60% (in Different States) on the basic price! How much more will this Govt add on the common man’s back? Till it breaks, I guess!
At this price, even diesel is NOT a subsidized product as the cost is exactly the same at Rs. 48 per liter for Diesel (the refining process yields all final products at almost same cost!), which is sold at Rs. 56-61 per liter! So, they should spare us these bullshits on “Govt. subsidizing the rich for their cars and two wheelers!” an d if they do not want to subsidize, they should not! It’s simple. Why go through the convoluted path of shielding consumers from price hikes and falls (And that too, as we have seen, is a gross lie), absorb that loss from the oil marketing companies(Since they are, in reality, making huge, huge profits!) and ultimately put that back on India’s national budget which again is coming from the tax money? And in the process, taxing this heavily!
This is a big hypocrisy, one of the many by this Indian Govt. In fact, if we look at the petrol prices at Purchasing Power Parity, we are paying the highest! Talk of being subsidized!
Source:
Times of India
So, even TOI, which is usually a mouthpiece of Congress and their articles make me puke, acknowledges this loot!
In fact, the heaviest investors in OIL companies are Insurers like LIC. And this is a big, big area where their profits come from. In fact, The Life Insurance Corporation picked up around 37.7 crore shares in the ONGC offer for sale held early this year, raising its total stake in the company to 9.48 per cent ! For sure, such a big company will not invest and hence be prone to these losses, if the companies they invested in is not a profit making one. In fact, huge profit making one!
The way forward would be let the oil companies make a profit, say 10%. And sell it at Rs 52. 8. They will make profits, still, but at least we will be spared the ‘We are helping you in the process’ thought.
Shitty Thought! For a shitty thing.
In fact, the heaviest investors in OIL companies are Insurers like LIC. And this is a big, big area where their profits come from. In fact, The Life Insurance Corporation picked up around 37.7 crore shares in the ONGC offer for sale held early this year, raising its total stake in the company to 9.48 per cent ! For sure, such a big company will not invest and hence be prone to these losses, if the companies they invested in is not a profit making one. In fact, huge profit making one!
The way forward would be let the oil companies make a profit, say 10%. And sell it at Rs 52. 8. They will make profits, still, but at least we will be spared the ‘We are helping you in the process’ thought.
Shitty Thought! For a shitty thing.
PS: In March 2012, the Chief Minister of Goa, Mr. Manohar Parrikar, has shown us all the way forward, by announcing a reduction of Rs. 11 per liter of petrol! I sincerely hope many other states follow this brilliant yet popular move and expose these popular myths going around about petroleum pricing!
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