Not edited much after Mar 2010.

 

1.  Misuse of Term: Subsidy

Subsidy means normally, assistance, aid in money. [ chamber's Dictionary]. I do get irritated and annoyed when subsidy term is used to denote the price at which, LPG gas is supplied to the public.

Question of giving subsidy to the real owners of the Oil is an absurd notion / misuse of words. How can an owner get subsidy ?

 

2. Government makes lot of Money on Mineral Oil / Crude / Petrol

ONGC, is a Government of India / Public Sector Undertaking - Public are the real, ultimate owners

In 2008-09, as per ONGC's Annual Report, the Profit before tax is 239807 Million Rupees on total income of 650494 Millions. That is, Profit before tax is 36.86%. On an investment of 50903 Millions [ page 22 of annual report ],  it makes a profit of 239807 Millions. [ More than 4 times profit on investment !

So, any person saying that Government is making a loss on crude / Petrol or anything, is talking without reference to complete facts

 

3  The Deliberately screened Monumental Disturbing Facts

 

a]  From Crude, the output of Petrol can vary from 35 to 45 %. Nothing more

Boiling point of Petrol is I think, 78* Centigrade. As this would distill / come out first, the other higher boiling materials like light distillate / kerosene, heavy boiling oil / motor engine oil, the wax and the waste, Tar / Dambar should account for the remaining portion

Are all the other distillates priced properly ?

 

4]  High Tax even after original objective met ?

It was under section 68 - NES /  Not elsewhere specified. In the name of Bangla Desh war expenses, section 68 products came under 1% excise, then 2 %, under Janata rule 5%. Bangla Desh War expenses have been met which was the stated cause for Excise.

[ I have bought Petrol at Rs 1.37 paise and thereafter at Rs 1.75 / litre in 1974 and 1975. No excise duty then or to this extent ]

As the basic reason is irrelevant now, Excise should be abolished on Petrol.

The total Excise and Sales Tax paid by ONGC is 85443 on the above reported total income.

The Tax accounts for 13.13%

Can the Government reduce Tax ? Yes, if Public Protests shakes their chairs

Last time when the Government increased the price of LPG Gas Cylinder, Ms Shiela Dixit reduced the tax. The new price was lower than the old price. The whole exercise was a hoax. 

When the Government increased the price of petrol 4-5 years back, Ms Brinda Karat pointed out in the Parliament that the Government collected over 5000 Crores in excess - Any one got refund ?

 

5. Aligning with International Crude Prices

This is the high sounding shallow exercise. Government wants to sanctify it with Mr. Kirit Parekh's report and such others in its shelves. It just does not make sense.

 

i] Pricing: Pricing a product should account / take into consideration the Raw Material Cost, Manufacturing / Production cost, Administrative cost, Selling and Distribution cost, Return on Investment and the perpetual, ever expanding, whimsical and arbitrary government levies.

Like an Opportunistic / mercenary / Monopolistic Seller, the proposed Fuel price hike seems based on 'what the market will bear approach'. There is no semblance / due weightage for any one of the above factors.

ii] International Linkage - only the Convenient excuse, but not all the Relevant Factors !

As of February 21, 2010, the Price of Petrol in America is cheaper than India - one of the richest country in the World. India is a country with over 30% below the Poverty Line. Did anyone check the reason for the lower petrol price in America ?

US petrol Price is below 3 Dollars per gallon. One US Gallon is 3.78 litres. Even assuming exchange rate of Rs 48 per Dollar, the price of Petrol in US is only

Rs 40 per litre at the maximum exchange rate and is about Rs 38, if the present exchange rate of Rs 46 is assumed valid for 6 months.

The figures above indicate the 'anomoly' and that is deliberately, side tracked

 

iii] Social Objective - dereliction of Duty !

Government should take into account the 'social objective / welfare of the Public' - that is its basic duty and is elected to office for that. If it fails, it looses the moral right, if any.

6:  Is the Government indulging in deliberate bluffing ?

Aviation Fuel:  Aviation fuel is a special type of Kerosene. Government sells it at about Rs 27 per litre. Jet and Kingfisher complained in the past that Indian Prices are far higher than International Prices.

Government, reduces the price of Aviation fuel, promptly. And Kerosene is kept in short supply. The road side tea stall vendors pay Rs 40 / litre now. Policemen will come for sudden inspection and treat you worse than Dawood Ibrahim and ask for a bribe of 10000 or more for keeping kerosene [ In November, one person was asked a bribe of Rs 30000/- for keeping about 30 litres Kerosene ]

Why Not improve the Supply ? The Government, only prior to the election, remembers that 60& of Indian Public, earn less than Rs 5000/ per month

7. My suspicion

The Government / has not properly allocated the relevant cost to other products like Tar, Motor Oil and other items.

They harp on Petrol, LPG and Kerosene. ONGC was flaring / burning the Gas from Bombay High. Now they are getting some money. So, wherefrom, did the 'under recovery' and such other lies, germinate ?

The present Government is run by Indira Gandhi Congress !

Did she not cry about the Onion Price rising to 50 paise per kg and won an election !

 

8  Inflation  - the Cascading effect

Goods have to be Transported from one place to another.  Transport cost will lead to inflation !

 

9   Does ONGC pay proper commission to the selling Agents ?

Esso and Burmah Shell were not crying about low margins. They were selling Kerosene at 20 paise per litre. They became HPCL and BPCL, after they got thrown out of India by K.D. Malaviya

What is the International margin for selling agents ? How can there be under recovery by HPCL and BPCL, unless they have been grossly inefficient

Or,  they got used to cost plus plus operation style, as a Government unit.

 

10 other relevant reasons for the blast

The Natural wealth of the Country, which includes Oil, belongs to the people.

Why should they pay more, for the reckless, wayward, excess greed of the Government, when the intended price rise is not reasonable and counter productive ?

7th June 2010: Mr. Kirit Parikh, Chaturvedi and such other experts blabber their views on TV. CNBC TV 18 is the self Certified No 1 Business Channel. And I read Times of India, the No 1 English Daily in India. And then, there is Business Standard.

Why the hell fuel price should be raised is the question that the Media should ask first ?

Unlike Swarajya, Thuglak or Himmat, they lack guts and thoughts and act like dumb cassettes

Under Recovery by Oil Marketing Companies is a convenient but never explained phrase that all of them use ad nauseum. The Overheads have not been allocated properly is my opinion. You cannot get clarity and production figures in their annual reports

11. Pathetic or self serving persons ?

 

a] Mr. Sharma of ONGC is satisfied that ONGC gets 57 Dollars per barrel.  Should he not reduce the price of petrol and diesel, with the excess profits ONGC is earning ?

b] I cannot understand why persons like Kirit Parikh or Rangarajan accept predecided assignments / vague briefs and come with reports, which only lower their standards

If they have ignored Petrol content in Crude, they have ignored a basic point

If I transfer my money from the right side pant packet to the left side, and leave only some loose changes and ask an expert, judge or anyone to verify only my right hand side packet, they can detail my money in the right side packet and certify that it is very small. They have failed to inspect the left packet where I have transferred the money

Such an assessment is worthless, even if it is authored by persons like Rangarajan, written in Queen's English and presented with nice design and lay out.

Parikh's report is a meaningless exercise in futility.

Around 5th June 2010, Mr. Parikh blabbered on CNBC TV 18 that increase in petrol prices would mean less Pollution and better use of the fuel. What an incisive idea ? Why not, cut the production of 2 and 4 wheelers by 15% / one more holiday per week for all auto companies ?

Make owning Private Vehicles costly and improve the Public Transport system as in Singapore. That would benefit the Society

 

	Errors and Omissions exempted.  If there be any unwanted oversights, mistake in content or suggestions for improvements,  I will be thankful for your feedback
	Personal website of R. Ranganathan M.Sc., [ MBA - IIMA]    Main / original content: 2007: last minor modification, Aug 20,  2011