{"id":324461,"date":"2020-07-05T21:33:38","date_gmt":"2020-07-05T21:33:38","guid":{"rendered":"http:\/\/tehelka.com\/?p=324461"},"modified":"2020-07-05T21:33:38","modified_gmt":"2020-07-05T21:33:38","slug":"daily-oil-price-hike-is-fuelling-negative-sentiment","status":"publish","type":"post","link":"https:\/\/tehelka.com\/daily-oil-price-hike-is-fuelling-negative-sentiment\/","title":{"rendered":"Daily oil price hike is fuelling negative sentiment"},"content":{"rendered":"
\"\"Crude oil rates had hit rock bottom recently, yet petrol and diesel prices are at a 21-month high after being increased consecutively almost on a\u00a0<\/span>day to day basis.<\/span><\/div>\n
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A litre of petrol in Delhi as of 16 June, 2020, was at 76.73 while diesel was at\u00a0<\/span>75.19 a litre. In Mumbai, the retail price was 83.62 a litre for petrol and 73.75 a litre for diesel. The last time the fuel prices were so high was in October 2018, when crude oil prices were $65 per barrel as opposed to the existing $35-$40 per barrel range.<\/span><\/div>\n
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The Oil Marking Companies have been revising fuel prices daily since June 7 to regain the losses incurred during 82 days of the lockdown. However, the main reason is the increased excise duty on petrol and diesel. Last month, the central government increased the excise duty on a litre of petrol and diesel by 10 and 13, respectively. Little doubt that this led to hike in rates of petrol and diesel in retail. Of the increased Excise Duty, 8 will be counted as road and infrastructure cess while the remaining will account for special additional excise duty.<\/span><\/div>\n
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Incensed by the rise in petrol and diesel prices, the opposition Congress has demanded that the prices of Petrol and Diesel should be brought under the GST. It said that the government must reduce the prices of Petrol, Diesel and LPG to the August 2004 level. It is important to\u00a0<\/span>remind that the current crude oil prices at about 40 US Dollars is similar to the\u00a0<\/span>August 2004 level and yet consumers are paying a heavier bill. \u00a0<\/span><\/div>\n
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In August 2004, Petrol was 36.81 per litre, Diesel 24.16 and LPG 261.60 per cylinder in Delhi but currently Petrol is being sold at 75.78 per litre, Diesel at\u00a0<\/span>74.03 per litre and LPG at 593 per\u00a0<\/span>cylinder. It also demanded that the\u00a0<\/span>government must immediately rollback the Excise Duty hike of 23.78 on petrol and 28.37 on Diesel. The Congress party in a statement said that it is a matter of record that excise duty on Petrol\u00a0<\/span>was 9.20 per litre and on Diesel, it was 3.46 per litre in May, 2014 when the\u00a0<\/span>present government assumed office. In the last six years, the excise duty on Petrol and Diesel have been increased on\u00a0<\/span>Petrol by an additional 23.78 per litre and on Diesel by an additional 28.37. This translates into a 258 percent increase in excise on petrol and 820 percent hike in excise duty on diesel.\u00a0<\/span><\/div>\n
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Between financial year 2014-15 to\u00a0<\/span>fiscal year 2019-20, the government has hiked taxes on Petrol and Diesel 12\u00a0<\/span>times and has collected a whopping 17,80,056 crore in just the last 6 years. When the people are reeling under\u00a0<\/span>difficult conditions, the government has no right to further burden them under high taxation. If the Government, rolls-back the increased excise duties during its tenure both petrol and diesel prices will immediately come under 50 per litre.<\/span><\/div>\n
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It is noteworthy that on 26th May, 2014, the present government assumed power, the oil basket price of Indian Oil Companies was 108 US Dollar or 6,330, which means the oil per litre, was costing 39.81. As on 12 June, 2020, the oil basket rates for Indian Oil Companies is 40 US Dollar per barrel is 3038.64 per barrel. the one barrel has 159 litres that means the cost per litre today is 19.11 per litre. So, the petrol, diesel and LPG rates can be hugely decreased in comparison to the reduced purchasing price.<\/span><\/div>\n
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The Congress Party has demanded that the benefit of reduced international crude oil prices should be passed on to the people and the rates of Petrol-Diesel-LPG gas be reduced to August 2004 level.\u00a0 Petrol and Diesel should be brought\u00a0<\/span>under the GST.<\/span><\/div>\n
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Significantly, the companies did not increase fuel prices during lockdown but once relaxation came into it and demand shot up, the oil marketing companies effected the impact of increase in excise duty on the consumers. The economists suggest that increasing fuel prices result in inflation as transportation costs go up. This would mean that prices of essential items will go up correspondingly. As this is happening at a time when there is\u00a0<\/span>liquidity crunch and people are losing on their earnings, it is bound to hurt more. There are job cuts and salary cuts while businesses are yet to pick up. What was required was infusion of more liquidity than burning a hole in people\u2019s pockets by increasing fuel prices.<\/span><\/p>\n

Around 70 per cent of the retail price of fuel comprises taxes:<\/span><\/strong><\/div>\n

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Petrol per litre<\/span><\/strong>
\nBasic Price: 17.96<\/span>
\nFreight: 0.32<\/span>
\nExcise Duty: 32.98<\/span>
\nDealer Commission: 3.56<\/span>
\nVAT: 16.44<\/span>
\nTaxes and Duties: 70 per cent<\/span><\/div>\n
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Diesel per litre<\/span><\/strong>
\nBasic Price: 18.49<\/span>
\nFreight: 0.29<\/span>
\nExcise Duty: 31.83<\/span>
\nDealer Commission: 2.52<\/span>
\nVAT: 16.22<\/span>
\nTaxes and Duties: 70 per cent<\/span><\/div>\n
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Ironically, when global prices go up, the increase is passed on to consumers.\u00a0 However, when they come down in the international market, taxes and levies\u00a0<\/span>are imposed. The only gainer is the\u00a0<\/span>government or the oil marketing companies.<\/span><\/p>\n

Over dependence on imports\u00a0<\/span><\/strong><\/div>\n

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A yet another major reason for high prices of fuel in India are due to over dependence on imports. The government has been aiming to cut oil import dependence to 67% by 2022 but local output\u00a0<\/span>has been falling year after year mainly due to ageing fields and lack of major discovery.<\/span><\/p>\n

Lower domestic production<\/span><\/strong><\/div>\n

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According to the Ministry of Petroleum and Gas, the crude oil production during March,2020 was 2697.42 TMT which is 13.97% lower than target and 5.50% lower when compared with March 2019.Cumulative crude oil production during\u00a0<\/span>April-March, 2019-20 was 32169.27 TMT which is 8.20% and 5.95% lower than target for the period and production during corresponding period of last year respectively.<\/span><\/div>\n
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There was a shortfall in production as the crude oil production by ONGC during March, 2020 was 1778.11 TMT which is marginally higher 0.56%when compared with March,2019 but 14.57% lower than the target for the month. Cumulative crude oil production by ONGC during April-March, 2019-20 was 20626.95 TMT which is 6.89%and 1.97% lower than target for the period andproduction during corresponding period of last year respectively. <\/span><\/div>\n
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Reasons for shortfall in production:<\/strong><\/span><\/div>\n
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Non realization of production from WO-16 cluster due to unavailability of MOPU.\u00a0<\/span>Less production from B-127 Cluster due to increase in water cut.\u00a0<\/span>ESP issues in wells of NBP and Ratna fields.\u00a0<\/span>Increase in water cut in certain\u00a0<\/span>wells of Mumbai High, Heera, Neelam& B173A fields.\u00a0<\/span>Less oil production due to restriction of movements for field operations in\u00a0<\/span>onshore fields due to COVID-19 lockdown.<\/span><\/div>\n
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The crude oil production by OIL during March, 2020 was 254.07 TMT which is 13.65% lower than the monthly target and 8.64% lower than the March, 2019. Cumulative crude oil production by OIL during April-March, 2019-20 was 3106.61 TMT which is 9.29% and 5.66% lower than target for the period and production during corresponding period of last year respectively. Reasons for shortfall in production were:<\/span><\/div>\n
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Rise in water cut in wells & decline in total liquid production of wells as a\u00a0<\/span>consequential effect of the wells shut-in during bandhs.\u00a0<\/span>Impact on progress of Work over and Drilling operations due to COVID-19.\u00a0 Less than planned contribution from work over and drilling wells as well as old well. Crude oil production by joint venures during March,2020 was 665.25 TMT which is lower by 12.45% than the monthly target and 17.67% lower than March, 2019. Cumulative crude oil production by Pvt\/JVs during April-March, 2019-20 was 8435.71 TMT which is 10.86% and 14.51% lower than target for the period and production during corresponding period of last year respectively. Reasons for shortfall in production are:<\/span>
\nLess than planned contribution from work over and drilling wells. ESP and Operations issues etc. in the Mangala, Bhagyam Aishwarya, ABH and Satellite fields.\u00a0<\/span>Production reduced in 5 oil wells due to water loading and sand issue. (CEIL)\u00a0<\/span>Underperformance of wells (ONGC)<\/span><\/p>\n

Natural Gas<\/span><\/strong>
\nThe natural gas production\u00a0during March,2020 was 2411.16 MMSCM which is 21.89% lower than the monthly target and 14.38% lower when compared with March, 2019. Cumulative natural gas production during April-March, 2019-20 was 31179.96MMSCM which is 9.76% and 5.15% lower than target for the period and production during the corresponding period of last year respectively.<\/span><\/div>\n

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Natural gas production by\u00a0ONGC\u00a0during March, 2020 was 1905.52MMSCM which is 19.23% lower than target and 10.74% lower when compared with March 2019. Cumulative natural gas production by ONGC during April-March, 2019-20 was 23746.19 MMSCM which is 8.13% and 3.76% lower than target for the period and production during corresponding period of last year respectively. Reasons for shortfall in production:<\/span><\/div>\n
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Closure of gas wells in offshore in March\u201920 due to less off take by GAIL and GSPC due to on-going COVID-19 lockdown conditions.<\/span><\/div>\n
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Less Gas production from Vasistha\/S1 wells in EOA due to sand\/increase in water\u00a0<\/span>Non-realization of gas production planned from WO16 cluster.\u00a0<\/span>Less than planned gas production from Bassein field, Daman Tapti Block and marginal fields.\u00a0<\/span>Less production due to less gas off take by OTPC, Tripura.\u00a0<\/span>Less production due to less gas off take by gas consumers in Cauvery and Rajahmundry assets and no gas off-take in Jodhpur Asset.<\/span><\/p>\n

The natural gas production by OIL during March, 2020 was 211.62 MMSCM which is 22.10% lower than monthly target and 10% lower than March, 2019. Cumulative natural gas<\/span>
\nproduction by OIL during April-March, 2019-20 was 2668.25 MMSCM which\u00a0<\/span>is 19.38% and 1.97% lower than target\u00a0<\/span>for the period and production during corresponding period of last year respectively. Reasons for shortfall in production:<\/span><\/div>\n

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Decline in production potential of gas wells consequent shut-in during protest and bandhs.\u00a0<\/span>Controlled production because of low market demand (Tea Sector) during lockdown due to COVID19.\u00a0<\/span>Brahmaputra Valley Fertilizer Corporation Limited, BVFCL\u2019s Namrup-II plants shutdown due to problem in Synthesis Gas Section and Namrup-III plants shut-down due to Urea reactor tube leakage.<\/span><\/div>\n
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NTPS \u2013 Due to various maintenance issues of their existing gas turbines. Besides these, Namrup Replacement Power project (NRPP) shutdown due to compressor valve problem.\u00a0<\/span>Natural gas production by private sector and join ventures during March,2020 was 294.03 MMSCM which is 35.53% lower than monthly target and34.07% lower than March, 2019. Cumulative natural gas production by Pvt\/JVs during April-March, 2019 was 4765.51MMSCM which is 11.67% and 12.99% lower than target for the period and production during corresponding period of last year respectively. Reasons for shortfall in production:<\/span><\/div>\n
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The CPSE Refineries\u2019 production during March, 2020 was 12261.57TMT which is 10.27% lower than the target for the month and3.86%lowerwhen compared with March, 2019.Cumulative production by CPSE refineries during April-March, 2019-20 was 144715.69TMT which is 2.18% and 4.15% lower than target for the period and production during corresponding\u00a0<\/span>period of last year respectively. Reasons for shortfall of refinery production :<\/span><\/div>\n
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IOCL, Guwahati & Bongaigaon: Lower due to planned shutdown.<\/span>
\nIOCL, Barauni, Haldia, Mathura, Panipat, Paradip and Jharia: Lower in line with demand.<\/span>
\nCPCL, Manali: Crude throughput is lower than target due to product containment issues because of Covid-19 lockdown.<\/span><\/div>\n
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NRL, Numaligarh: Processing is as per crude availability\u00a0<\/span>Production in JV refineries during March, 2020 was 1698.07TMT which is 6.93% higher than the target for the month but 5.53% lower when compared with March, 2019. Cumulative production by CPSE refineries during April-March, 2019-20 was 20154.97 TMT which is 7.46% and 10.81% higher than target for the period and production during corresponding period of last year respectively. Production in private refineries\u00a0during March, 2020 was 7243.95TMT which is 8.81% lower than the target as well as corresponding month of last year.<\/span><\/p>\n

Way out<\/span><\/strong><\/div>\n

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With domestic output remaining stagnant, India\u2019s oil import dependence has risen from 82.9 per cent in 2017-18 to 83.7 per cent in 2019-20. What may look more scary is that the World Energy Outlook 2019 published by International Energy Agency shows that India\u2019s oil demand in total primary energy is projected to increase from 233 MT in 2018 to 305 MT in 2025.<\/span><\/div>\n
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To take advantage of the low crude oil prices led by an unprecedented\u00a0<\/span>demand crisis in the global market,\u00a0<\/span>India is now stacking up crude oil for the future and has decided to fill the strategic petroleum reserves (SPR) to their full capacity and the first consignment of one million barrels of crude has been procured through Indian Oil. It is suggested that the import reduction strategy should include increasing domestic production of oil and gas, improving energy efficiency and productivity, giving thrust on demand substitution, promoting biofuels and renewable energy.<\/span><\/div>\n","protected":false},"excerpt":{"rendered":"

Crude oil rates had hit rock bottom recently, yet petrol and diesel prices are at a 21-month high after being increased consecutively almost on a\u00a0day to day basis. A litre of petrol in Delhi as of 16 June, 2020, was at 76.73 while diesel was at\u00a075.19 a litre. In Mumbai, the retail price was 83.62 […]<\/p>\n","protected":false},"author":21,"featured_media":324464,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[23,2205],"tags":[2398,1492,1493],"_links":{"self":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/324461"}],"collection":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/users\/21"}],"replies":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/comments?post=324461"}],"version-history":[{"count":1,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/324461\/revisions"}],"predecessor-version":[{"id":324473,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/posts\/324461\/revisions\/324473"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/media\/324464"}],"wp:attachment":[{"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/media?parent=324461"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/categories?post=324461"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tehelka.com\/rest-api\/wp\/v2\/tags?post=324461"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}