Some facts about “petroleum subsidy”

The Government of India has been talking about how it is subsidizing oil companies. Here are some facts which will indicate who is subsiding whom.

Country Percentage of tax to total price–petrol

Percentage of tax to total price -diesel

India 51 30

Sri Lanka

37 20
Pakistan 30 15

All the oil and gas producing companies in India, both the public sector monopolies like ONGC and Oil India, and private corporates like Reliance which extract crude oil and gas from Indian fields, price their products at the world market price of the day, even though cost of production is much less. India produces about 25% of its oil and gas requirements, while it imports the rest. As a result, the oil and gas producing companies are making massive profits through overpricing.

Taxes on petroleum products constitute the biggest chunk of revenue for the government.  In 2010-11, the contribution of these taxes is expected to be to the tune of Rs 1,20,000 crores or nearly four times the claimed subsidy. Thus the reality is that people are being robbed to subsidise government handouts to corporates and financial oligarchy and arms merchants.

All the oil companies are reporting massive profits, increasing year after year. ONGC and Indian Oil Corporatation are investing thousands of crores in different countries of the world as part of oil and gas exploration. What do losses mean for the oil companies? These are notional losses — that is, were the oil companies allowed to sell their product as per international prices, without any constraints, their profits would be much more. The difference between the international prices and Indian prices is what government calls “subsidy”. Now, the government has decontrolled petrol, diesel and cooking gas prices. This means that people will pay not only the international cost of all petroleum products, they will pay over and above this, Rs.120,000 crores as taxes to the government.

When the UPA-II government came to power in May 2009, international crude price was 70 dollar per barrel i.e. Rs 21.43 per litre (1 dollar = Rs 49). Today it is 77 dollar per barrel which means Rs 22.13 per litre (1dollar = Rs 46.22).  One barrel is roughly 160 litres. So the international crude price has risen by 70 paise per litre so far.  How does this justify a price hike of Rs 6.44 per litre on petrol, Rs 4.55 per litre on diesel within the last four months, and Rs 3 per litre on kerosene and Rs 35 on domestic LPG now?

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workers    litres    dollars    UPA    ONGC    OIL    power    companies    taxes    Jul 16-31 2010    Struggle for Rights    Economy     Rights    

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