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In a highly oil import dependent country like India, about 76 per cent of the crude oil that is processed in the country is being imported.
MMT
2001-02
2002-03
2003-04
Crude Oil Processed
106.5
110.6
118.7
Imported
78.7
82.0
90.4
Percentage
74%
74%
76%
Being an oil import dependent country, it is natural that product prices reflect international oil prices as Indian refineries need to pay international prices for crude oil imports.
International Crude Oil Prices
Bench mark crude prices have reached 21 year highs and recorded unprecedented levels during October, 2004. West Texas Intermediate (WTI) crude oil crossed $56/bbl on October 22, 2004 as against $36.53/bbl during April 2004.
Indian basket of crude oil prices averaged $ 43.88/bbl in October 2004 or about 190 per cent of March 2002 price of $23.31bbl
Indian basket of crude oil prices was 22 per cent higher in October 2004 than those prevailing in May 2004, when the United Progressive Alliance (UPA) Government took over.
Higher Import Bill
Crude oil imports were valued at Rs. 60,942 crore for the first half of 2004-05 (for crude oil imports of 49.6 MMT) as against Rs. 38,665 crore (for crude oil imports of 44 MMT) during the same period in the previous year, an increase of 58 per cent.
Retail Selling Prices (RSPs)
No change has been made in case of Public Distribution Scheme (PDS) kerosene, even though international prices of kerosene have risen to $58.29/bbl in October 2004 (an increase of 147 per cent) from $ 23.65/bbl since March 2002, when the last price change was made. PDS Kerosene requires an increase of Rs. 11.28/litre at Delhi and yet no change has been permitted.
While international LPG prices have risen to $ 467/MT currently from $ 194/MT in March 2002, an increase of 140 per cent but domestic LPG retail price has been raised to Rs. 281.60/cylinder from Rs. 240.45/cylinder as on April, 2002 at Delhi, an increase of 17 per cent. As against required increase of Rs. 158.15/cylinder in Domestic LPG in Delhi, only an increase of Rs. 20/cylinder has been permitted recently.
RSPs of diesel have been adjusted by 9 per cent in November 2004, though international prices have risen by 26 per cent since the last price change in August 2004. The price increase required for diesel in Delhi was Rs. 4.24/litre whereas the increase has been restricted to Rs. 2.12/litre.
RSPs of petrol have been adjusted by 6 per cent in November 2004, though international prices have risen by 19 per cent since the last price change in August 2004.
PSUs’ Requirement
Price increase is necessary to keep oil PSUs healthy and maintain their ability to serve the nation. Oil marketing companies namely Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPC) and Hindustan Petroleum Corporation (HPC) have shown much lower profits in the first half of 2004-05 as compared to 2003-04. Indo-Burmah Petroleum (IBP) has shown a loss during the first half of 2004-05.
As per Mashalker committee recommendations on Auto fuels, refineries are required to start supplying Euro III fuels by April, 2005 and Euro IV by April, 2010. To meet the proposed new environmental friendly norms, refineries have already invested Rs.12,000 crore and are in the process of further investing another Rs. 18,000 crore.
Marketing companies need funds to strengthen existing marketing networks for sustaining supplies to growing oil demand.
Upstream companies require funds to discover oil domestically and to acquire equity oil abroad to enhance oil security. Besides, large investments are required for setting up gas and Liquefied Natural gas (LNG) infrastructure.
Even after the current price increase the country provides a much larger subsidy in prices of PDS Kerosene and domestic Liquefied Petroleum gas (LPG) than neighbouring countries in the subcontinent namely Pakistan, Bangladesh, Sri Lanka and Nepal.
Product
India
(Delhi)
Pakistan
(Karachi)
Bangladesh
(Dhaka)
Sri Lanka
(Colombo)
Nepal
(Katmandu)
Kerosene
(Rs/Ltr)
9.01
18.68
15.44
11.30
15.30
LPG
(Rs/Cyl)
281.60
411.99
283.05
372.62
462.25
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