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Energy-Pool politics - Views on News from Equitymaster
 
 
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  • Oct 4, 2000

    Energy-Pool politics

    The Government has recently announced a hike in the price of petroleum products. It has done well to keep all vested parties informed of the financial burden created by the soaring international crude oil prices. This has allowed remedial steps without much furor.

    To tackle the infamous oil pool deficit the Government has devised a three-pronged approach. Increase in prices, cut in duties and issuing oil bonds. All measures are expected to contribute equally to cover the deficit.

    The leaks…
        HSD Kerosene LPG*
    Annual Consumption bn litres 45.6 12.5 415.6
    Subsidy/Litre Rs/Litre 3 5 160
    Total Subsidy Rs bn 136.8 62.5 66.5
    Drain on oil pool Rs bn 265.8    
    * Based on cylinder sales
    # no's are estimates

    As of September 30 the Government has increased the prices of petroleum products. The prices of petrol and kerosene have been increased by 10% and 50% respectively. While diesel, aviation turbine fuel (ATF) and liquefied petroleum gas (LPG) have risen by 20%.

    The plugs…
        HSD Kerosene Petrol LPG*
    Bi-annual Consumption bn litres 22.8 6.3 3.4 207.8
    Price Increase Rs/Litre 3.0 2.5 2.0 40
    Increased inflows Rs bn 68.4 15.6 6.9 8.3
    Total inflows Rs bn 92.3      
    * Based on cylinder sales
    # no's are estimates

    Duty cuts have also been implemented in respect of import and excise. Import duty on crude oil has been reduced to 10% from 15% and that on petroleum products from 25% to 20%. Excise duty on diesel and petrol has been reduced to 12% and 16% from 16% and 32% respectively. The duties on LPG and kerosene have not been touched as they are in the lowest excise braket of 8%.

    The Government plans to track crude oil prices to ascertain the necessity of issuing oil bonds. They will be issued if prices fail to soften in the second half of FY01.

    Although delayed the move is in the right direction. Resistance, however, to price increase has cropped up in certain populist quarters.

     

     

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