[longhorn]

The centre and more so the FM, as expected, is dilly dallying on excise duty cuts. Wonder where all the enthusiasm he showed to time excise hikes with clockwork precision to nullify crude oil price drops went? How come no such enthusiasm is seen when crude prices are climbing? Did he expect crude to stay at 27$ for eternity? The government still saying excise MAY be cut if oil prices stay above 50$ a barrel. Still no surety there.

And these very same bozos conducted bharat bandh just about 2 years ago, when they were sitting in opposition and fuel prices were hiked due to crude hitting 120$. And what about the excise hikes that happened when crude went below 40$ and again when it went below 30$. Isn't it high time those hikes as reversed, especially since crude is continuously above 40$ for some time now?

[lurker]

At least we can ask the questions promptly, no need for any dilly dallying here:

Why was the 'administered price mechanism' given a new name ??

because prices are still 'administered' & there is no freedom.

a better name for so-called deregulated Indian oil pricing mechanism would have been.

1. Administered on Lows, deregulated on highs.

aka AOLDOH price mechanism.

this is a very India specific price mechanism. Crafted by tons of bureaucrats who have passed UPSC examinations who are in cahoots with private oil refiners and some pliant politicians who have been sold snake oil of budget deficit.

[sgiitk]

Now let us see. If they are talking of International Price parity then the ₹ seems to be back below ₹67 to a $. I have a strong feeling that the PSU firms are trying to raise money to upgrade refineries to Euro-VI.

[ptaneja]

Its been 7 months since I bought a diesel vehicle - price has increased to almost 10rs/litre since then !!

Though it is still working out cheaper than Petrol - but still ... :(

[lurker]

Originally Posted by sgiitk

Now let us see. If they are talking of International Price parity then the ₹ seems to be back below ₹67 to a $. I have a strong feeling that the PSU firms are trying to raise money to upgrade refineries to Euro-VI.

common SG saar, why you keep selling this canard. The govt makes rs. 70,000 crore profits per year from selling fuel. This much money can finance the total budget of half of africa or entire SAARC group of countries minus India.

You are talking about upgrading some 2 bit refinary ? They can build 10 brand new refineries with that kind of money.

[bullrun87]

Originally Posted by lurker

You are talking about upgrading some 2 bit refinary ? They can build 10 brand new refineries with that kind of money.

You seriously have no idea about how much a new refinery costs. You will only get one world scale refinery in that money.
It is estimated that it will take 30000 crore to upgrade India's refineries to euro 6.

[lurker]

Originally Posted by bullrun87

You seriously have no idea about how much a new refinery costs. You will only get one world scale refinery in that money.
It is estimated that it will take 30000 crore to upgrade India's refineries to euro 6.

From what little maths I know 70000 crore is well above 30000 crore. Reliance jamnagar refinery costed around $6 billion. And that is one of the largest refineries in the world. You think run of the mill IOC and BP cr*p to cost that much.

[shashanka]

Originally Posted by lurker

At least we can ask the questions promptly, no need for any dilly dallying here:
Why was the 'administered price mechanism' given a new name ??
because prices are still 'administered' & there is no freedom.
a better name for so-called deregulated Indian oil pricing mechanism would have been.
1. Administered on Lows, deregulated on highs. aka AOLDOH price mechanism.
this is a very India specific price mechanism. Crafted by tons of bureaucrats who have passed UPSC examinations who are in cahoots with private oil refiners and some pliant politicians who have been sold snake oil of budget deficit.

Very well put, lurker! - my sentiments exactly. These tons of UPSC bureaucrats are a breed I'm familiar with (my family, both immediate as well as extended, having contributed well to their exponential growth!) and their sticky fingers-in-the-till aptitude.

As so well depicted in "Yes Minister" & "Yes, Prime Minister", the career politician is a naive simpleton compared to the Machiavellian talents of the career bureaucrat!

[bullrun87]

Originally Posted by lurker

From what little maths I know 70000 crore is well above 30000 crore. Reliance jamnagar refinery costed around $6 billion. And that is one of the largest refineries in the world. You think run of the mill IOC and BP cr*p to cost that much.

Jamnagar was built almost 10 years ago. You have to include inflation also. A 6 billion project 10 years ago will cost twice as much now considering 6-7 percent inflation. Does buying a piece of land or buliding a house cost the same as it did 10 years ago?
Refineries of state refiners are not "run of the mill", they employ same refining technology as reliance or shell or exxon. With two refineries making same euro 4 petrol, diesel, LPG and avaition fuel why would you assume one is state of the art while the other is "run of the mill". Refining is a complicated operation involving a large number of steps and if two refineries make the same product then they have similar technology. My point is that a modern refinery will cost the same no matter who builds it. What you're saying is that even though both JET airways and air India own the same Airbus A320, the Jet airways plane will be superior while Air India's plane is "run of the mill"

[lurker]

Originally Posted by bullrun87

Refineries of state refiners are not "run of the mill", they employ same refining technology as reliance or shell or exxon. With two refineries making same euro 4 petrol, diesel, LPG and avaition fuel why would you assume one is state of the art while the other is "run of the mill". Refining is a complicated operation involving a large number of steps and if two refineries make the same product then they have similar technology. My point is that a modern refinery will cost the same no matter who builds it. What you're saying is that even though both JET airways and air India own the same Airbus A320, the Jet airways plane will be superior while Air India's plane is "run of the mill"

Sir, I am presuming reliance refining capability for poor quality crude takes capital cost higher and per barrel cost lower. IOC & BP/HP do have that kind of foresight too, but their bureaucrats do not have any incentive to raise that kind of money on promoting refineries that undercut the private sector. They have incentive to do the opposite, if you know what I mean.

BP & HP also have had a sweet ride thus far, because their south Indian refineries were busy processing Iranian crude bought at dirt cheap prices. Now that are hard up against the wall, since Iran is now in free market.

[bullrun87]

Originally Posted by lurker

Sir, I am presuming reliance refining capability for poor quality crude takes capital cost higher and per barrel cost lower. IOC & BP/HP do have that kind of foresight too, but their bureaucrats do not have any incentive to raise that kind of money on promoting refineries that undercut the private sector. They have incentive to do the opposite, if you know what I mean.

BP & HP also have had a sweet ride thus far, because their south Indian refineries were busy processing Iranian crude bought at dirt cheap prices. Now that are hard up against the wall, since Iran is now in free market.

sir,
you are absolutely correct about poor quality crude. Sour crude is high sulphur while sweet crude is low sulphur. Let me summarise.

*Indian market is significantly diesel biased so to make more diesel you gotta use poor quality crude which yields more heavier fractions as opposed to more expensive lighter crude which will yeild more petrol/lpg.
*Light crude is much more expensive and although a cheaper refinery can process it but overall the economics still favor the heavy crude and complicated/ expensive refinery setup.
*India imports most crude from the middle east which are generally heavier.
*The crude oil coming out of our world’s reserves is growing increasingly sour.

Actually all of the newer refineries globally have to be designed to use poor quality crude. Indian refineries are designed to process middle east crude which is mostly sour and generally refiners aim to buy the cheapest and worst crude their refineries can handle. No one will make a new refinery these days which cannot handle poor crude oil.

[lurker]

well, we have no idea whether they have upgraded refineries already or are just starting out or thinking of starting to. Why they were sleeping past decade while crude was getting sourer, they have enough hydrologists and geologist on payroll to decipher that crude will get more sour over the time and as the depth of drilling gets deeper mineral composition will also change.

We are nearing the end of the crude cycle, the world has to move on to other forms of fuel. And at this time this trio of IOC/BP/HP are trying to reinvent their refineries and upgrade them to process worse fuel. They should have done this 10 years ago. If they have not upgraded their refineries already, by the time they will get their act in order, the bus will have passed anyways. It will take atleast 5-10 years for them to upgrade their refineries if they start today. Such heavy machinery is not manufactured in a day. If you put an order with say L&T, then they will take 3 years at minimum to fabricate the necessary equipment with which these companies can upgrade. Another year to install, calibrate & operationalize this equipment. Any aspiring B-tech graduate from 1990s who did apprentice in Reliance jamnagar refinery can tell anyone here how much time they took in finetuning and trouble shooting the myriad problems they had once they decided to operationalize.

As of today, Reliance reliance refines more crude than IOC/BP/HP put together. Around 55mbpd. The cost of their refinery was 6 billion$ in 2008. Just buy from them, they have all capacity in place and no need to upgrade silly refineries to process heavier crude oil, which is just corporatespeak for more heavy carbon waste to be generated and processed, supposing that was the plan in delaying the upgradation in the first place. Who is trying to fool whom here ?

IOC/BP/HP are not going to upgrade anything IMHO, the cap ex and their revenues do not justify any upgrades. They are too much in connivance with anybody who greases their pockets to do anything of that sort. The timelines are against any such upgradation. And moreover they have already said that only metros will have Euro VI or some such nonsense, so only 3 or 4 major refineries processing bulk of crude (more than 10million bpd) need to be upgraded. The chota mota ones can either shut shop or just continue as usual.

[StarrySky]

Originally Posted by lurker

As of today, Reliance reliance refines more crude than IOC/BP/HP put together. Around 55mbpd. The cost of their refinery was 6 billion$ in 2008. Just buy from them, they have all capacity in place and no need to upgrade silly refineries to process heavier crude oil

..And moreover they have already said that only metros will have Euro VI or some such nonsense, so only 3 or 4 major refineries processing bulk of crude (more than 10million bpd) need to be upgraded. The chota mota ones can either shut shop or just continue as usual.

I'm not sure how practical this is, but if such a decision is made, people will sing a different tune - each time there is a price hike, people will be blaming the govt for shutting down IOC/BP/HP refineries and colluding with a private player.

[lurker]

ha ha .. IOC and Oil ministry bureaucrats have played/been played in such a way that this is the TINA (There Is No Alternative).

http://economictimes.indiatimes.com/...w/51551706.cms

Do you know what this means ?

this is not random off-the-cuff ramblings of a politician. This statement proceeds out of work of various different govt agencies, bean counter bureaucrats who have compiled statistics and many other bodies who have been tooled with resources to work towards this goal.

Now in 2016. IOC/BP/HP is planning to upgrade. They will eventually upgrade by 2020, spend tens of thousands of crores. To what effect ? By 2030, we aim to becoming 100% EV. So all these investment has pay off period of only 10 years. There is not even enough time for depreciation.

So this is a non-starter. Kuch bhi upgrade nahin hoga.

[sgiitk]

Originally Posted by lurker

You are talking about upgrading some 2 bit refinary ? They can build 10 brand new refineries with that kind of money.

As per my discussion with Prof Sharma, the author of the IITK report, most PSU refineries will have to be redone from ground up. They are too old and obsolete to be retrofitted. However, since the infrastructure is around them they will be used.

Well the 70,000 crore profit, will go into thin air if the inflation is allowed to increase. It is a tight rope managing the economy, which Keynesians like Sen & Swamy do not understand. I almost felt like adding another name and calling them the three Asses. Let us hope Lord Indra is kind this year.