[msdivy]

Originally Posted by Tats07

Can anyone tell me what is the reason for the Petrol price to be highest in Bangalore - Rs. 71+, whereas, in metros like Delhi and Mumbai they are cheaper? Delhi seems to be the cheapest in terms of price, just because it is the capital city?

Along with other regular tax & cess, fuel in Bangalore attracts ELRTS cess (later renamed as infrastructure cess). This is for building metro.

[Gooney]

Originally Posted by Sowmya

As you can see Kerala Govt are planning to reduce the state Tax to almost one rs. This will make the price cheaper by few penny.
In Bangalore we paid max RTO tax as well as Fuel tax, but the roads remains same, or patching up with debris/stone dust Greedy GOVT.

That is a very considerate step by the Kerala state government. However, trust me on this, Bangalore has pretty decent roads in comparison to India, if only it weren't for those god forsaken speed breakers!

[Dr.Sumit Bhatti]

Here is an interesting article.

[sgiitk]

OT: Why is Brent Crude now about $10 more than NYMEX crude?

Traditionally NYMEX and Brent crude used to be about the same. Why for the past 8 months or so is Brent about $10 more than NYMEX?

[vina]

Originally Posted by Dr.Sumit Bhatti

Here is an interesting article.

I'm not an expert, and I agree with the excessive taxation part, but a few comments over the article:

1. The guy has done crude oil =$100/barrel, = Rs.4500/160ltr = Rs28/ltr therefore petrol should cost no more than Rs. 28. Now I'm not sure about this, but I thought different constituents of a mixture (which is what crude is) ought to be priced differently (e.g. there is always some water in crude, and I don't think anybody would pay Rs. 28/ltr for that)
2. He claims that the 20% crude indigenously available need not be priced at international levels - without bothering to explain why that wouldn't be a subsidy (and also what effect, if any, would it have on overall fuel prices)
3. His definition of under recovery (he claims is is the difference between import parity price of petrol/diesel and market price) is suspect to begin with, and also even if that is the true definition, given that so much crude is imported it is not clear why should this not be the proper definition. But most importantly, what is our friend proposing - that the OMCs take the burden of the subsidy (implicit/explicit)?
4. If the truth is the way he presents, then why do Shell and Reliance charge similar (and presently higher) prices than PSU OMCs?

[Fordmanchau]

Originally Posted by Dr.Sumit Bhatti

Here is an interesting article.

Originally Posted by vina

I'm not an expert, and I agree with the excessive taxation part, but a few comments over the article:

1. The guy has done crude oil =$100/barrel, = Rs.4500/160ltr = Rs28/ltr therefore petrol should cost no more than Rs. 28. Now I'm not sure about this, but I thought different constituents of a mixture (which is what crude is) ought to be priced differently (e.g. there is always some water in crude, and I don't think anybody would pay Rs. 28/ltr for that)

Before this article came up here, I was doing my own little bit to find out how are the fuel components priced. Look at the table below. 1 barrel of oil produces different types of fuel(mentioned in the table alongwith amount produced) and plus there is 5% processing gain on it. I have tried to base my calculations factoring in this gain.But there is no additional cost considered.

Originally Posted by vina

He claims that the 20% crude indigenously available need not be priced at international levels - without bothering to explain why that wouldn't be a subsidy (and also what effect, if any, would it have on overall fuel prices)

Fuel prices are hiked basing on the fact that import cost of crude is increasing, and that's why I think he is right to a extent. IMO fuel might be priced by averaging the import cost and domestic cost together. I believe the domestic production cost of oil would be less, but yes as you say, even that would be counted for subsidy

Originally Posted by vina

If the truth is the way he presents, then why do Shell and Reliance charge similar (and presently higher) prices than PSU OMCs?

You have a point here, but what not a political compulsion can do??
Government should come clear on the total amount of gains they have by collecting tax on fuels. I strongly feel that govt. earns way more than what it gives as subsidy and there is a huge scope of reducing the fuel price by tweaking the taxes to the extent that it becomes subsidy neutral and then deregulating the prices.

[sgiitk]

This is a bit of an over statement, but as per OMC sources (on a financial channel) the petrol cost is c.Rs.30 (which ties in with the article). And Rs.33 (out of Rs.63) are taxes. Also, our FM is earning more as the excise and ST/VAT are a percentage. So the prince goes up and so does his take.

[vina]

Originally Posted by Fordmanchau

[/list]Before this article came up here, I was doing my own little bit to find out how are the fuel components priced. Look at the table below. 1 barrel of oil produces different types of fuel(mentioned in the table alongwith amount produced) and plus there is 5% processing gain on it. I have tried to base my calculations factoring in this gain.But there is no additional cost considered.
Attachment 550088

Thanks a lot sir this is great info

However, I have a few more questions, I hope you don't mind:

1. Are the percentages you have mentioned based on direct refining or are they based on what can be obtained with additional processing (e.g. cracking of heavier oils to obtain petrol - they do it a lot in US and I have read that gasoline sold in winters is different from the stuff sold in summers to account for the temperature differences)?
2. If it involves the additional cracking and other processing, have you included those into the costs? Or are those costs so marginal that the overall numbers don't change much anyway?
3. Are prices decided on a cost plus margin basis or is it a demand/supply thing? If processing/cracking allows the refiners to modify the composition relatively broadly, I think both methods will result in similar numbers (as long as processing costs are not very high) - whatever product is more in demand has to be produced more, and overall profits will be (roughly) maximized when margin on each product turns up about the same.
4. Kerosene is being shown 0% here - is that correct? Then where does the PDS (and the adulterers) get the Kerosene from?

The point I was making by mentioning Shell/Reliance was that in the article it was mentioned that the losses of the PSUs were only notional, and in fact they are making huge profits. Now Mukesh Ambani complained last year that he should be getting a share of the subsidy too - if PSUs were making money even without the subsidies, why would Ambani not be able to sell petrol and make money at PSU prices?

Originally Posted by sgiitk

This is a bit of an over statement, but as per OMC sources (on a financial channel) the petrol cost is c.Rs.30 (which ties in with the article). And Rs.33 (out of Rs.63) are taxes. Also, our FM is earning more as the excise and ST/VAT are a percentage. So the prince goes up and so does his take.

Sir, I think the break up is correct, once you include the import duty on crude (and/or excise on crude production) to the figures.

[sgiitk]

@vina; As per the same channel the duty on oil adds up to about Rs.5. Rest is moolah for the FM! At least they can make the taxes flat rate rather than a percentage.

I guess Mukesh Ambani has cut his price hike by Rs.2.50 (he put 5.25 earlier) to match the oil PSU's. He is not doing charity by reducing prices so must still be making some profit!

[vina]

Originally Posted by sgiitk

@vina; As per the same channel the duty on oil adds up to about Rs.5. Rest is moolah for the FM! At least they can make the taxes flat rate rather than a percentage.

I guess Mukesh Ambani has cut his price hike by Rs.2.50 (he put 5.25 earlier) to match the oil PSU's. He is not doing charity by reducing prices so must still be making some profit!

that is right. But last year, he was complaining that at the PSU pump prices he would have made losses.

Reliance exports a lot of its products straight from the refinery, so when the crude prices are high they export, when the crude prices are low they sell in domestic markets - they don't have to make money when the prices are low to pay for the cross subsidy when crude is high.


That said - Reliance's costs (both the refining costs and the price it pays for crude) are lower than that for the PSUs and while the PSUs make a lot of noise about losing money, they really will have a tough time competing if and when the subsidies finally go away fully. That is another reason why they are not as vocal as they should be on the under recoveries.

[sgiitk]

I agree 100%. I think it is taken at the current pump pricing Reliance is making some profit in its petrol. I will happily pay Rs.2.50 more for Reliance petrol since in my experience the measurement is (to coin a phrase) better and I get better economy as well. Unfortunately, the Reliance pump on NH25 Kanpur-Lucknow is closed.

Also, I cannot forget the incident about a decade ago. A PSU bought petrol from RIL for Delhi. It was of a higher rating so they 'cut' it with Naptha. Overdid it, and then sent it to the Kanpur depot. I was told by a dealer that he has had a lot of cars stalling with this petrol, and I must use additives till this fluid ran out.

[BulZire]

Petroleum companies are gearing up for another price hike of Petrol. On May 15 the petrol price was hiked to Rs 5 per liter. This time the hike will be Rs. 1.30 per liter and it will be effective from tomorrow

[Pri2]

IOC may hike petrol prices next month !

New Delhi: State-owned Indian Oil Corporation, the nation's largest fuel retailer, today said it may hike petrol price next month as the steep hike of Rs 5 per litre of May 15 was not enough to cover for the cost of crude oil.
"Even after the hike, we are today losing Rs 4.58 per litre. After including VAT, the desired increase at retail level comes to Rs 5.50 a litre," IOC Chairman RS Butola told reporters in New Delhi.
The desired hike in price has been calculated based on the average crude oil price of the first fortnight of May. However, from June 1, which will take into account the average of second half of May when international rates moderated, IOC will lose Rs 1.15 per litre. After including VAT, the desired hike in Delhi would be Rs 1.35 a litre.
"We will have to take a view (on hiking petrol price) soon," he said. "Government is not compensating us for selling petrol at below international cost since June 2010 when its pricing was freed."
Butola, however, refused to say when the rates will go up. "We will have to consider the environment we operate in before taking that call."
On diesel, he said, the company will from June 1 expected to lose Rs 12.64 per litre. It currently loses Rs 14.66 a litre on diesel.
Similarly, on domestic LPG it is losing Rs 380.57 per cylinder and Rs 25.85 a litre on PDS kerosene.
An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is likely to meet on June 9 to consider raising prices of the three controlled commodities - diesel, domestic LPG and kerosene.

Source: IOC may hike petrol prices next month - India News - IBNLive

[sgiitk]

Originally Posted by Pri2

However, from June 1, which will take into account the average of second half of May when international rates moderated, IOC will lose Rs 1.15 per litre. After including VAT, the desired hike in Delhi would be Rs 1.35 a litre. .........

On diesel, he said, the company will from June 1 expected to lose Rs 12.64 per litre. It currently loses Rs 14.66 a litre on diesel.
Similarly, on domestic LPG it is losing Rs 380.57 per cylinder and Rs 25.85 a litre on PDS kerosene.

So they should also jack up prices of diesel and LPG to make up 100% of the losses. I bet diesel sales will go up and Kerosene sales will plummet (Nepal has seen it!). Of course then Mukesh Ambani will be laughing all the way to the bank, with his profits.

[vina]

Originally Posted by sgiitk

So they should also jack up prices of diesel and LPG to make up 100% of the losses. I bet diesel sales will go up and Kerosene sales will plummet (Nepal has seen it!). Of course then Mukesh Ambani will be laughing all the way to the bank, with his profits.

Sir

why do you say that the kerosene sales will plummet?