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FUEL PRICE HIKE IN INDIA- Mikul Patel
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Trend The price hike is
almost continuous. The rate has
increase after 2010.
The increase in petrol prices is more than others.
Since the advent of CNG, the rate of increase has been controlled to a certain extent.Delhi Fuel Price Hike
Chart
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CAUSES
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Economic Reasons Supply and demand imbalances :
~40% of merchandise imports Depriciation of Indian Rupee
Vicious cycle Subsidies
Black Marketing
Deregulation of petrol after 2010
Rise in price of crude oil
Taxation
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Political Reasons Rejection of India’s call by OPEC for
regulating crude prices through a price band
Unsolved present issue of payment with Iran, India’s second crude oil supplier
Absence of reforms to regulate automotive sector
Huge tax revenues from import of crude oil
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Social Reasons Increase in number of vehicles
Use of vehicles even for short distances
Huge loss of fuel due to keeping engines on at traffic
Poor R&D in automotive sector. Causes of fuel price rise in India
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Crude Oil Refining Petrol Refining Margin
Transportation
Vendor Commissi
on
Production cost of
Petrol
Hoax of Petrol Subsidy
1 barrel of crude oil yields 150 litre of petrol.
1 US Dollar = Rs. 62 (as on 28th Feb 2014). Average price of 1 barrel of crude oil =
95.46 USD = Rs.
(95.46 x 62) = Rs. 5890
Refining, transportation, commission per barrel = Rs. 786
Production cost of 150 litre petrol = Rs. 5890 + Rs. 786
= Rs.6676 Production cost of 1 litre petrol = Rs. 44
Rs. 44
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IMPACTS
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GOVERNMENT BUDGET
If fuel prices are hiked:
Benefits central and state governments.
The Centre has a lower subsidy to pay out, but state governments' tax revenues on fuel also go up. Revenues that states earned from oil sector were Rs 126,512 crore in 2012-13, far above the subsidy paid to oil companies.
If prices remain same:
The petroleum subsidy is set to rise, though again it is worth noting that governments have usually earned more from the petroleum sector than they pay in subsidies to it.
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OIL COMPANIES
If fuel prices are hiked:
As of September 1, oil marketing companies have reported an underrecovery, of Rs 12.12 per litre of diesel sold.
A significant hike could reduce that amount.
If prices remain same:
Under-recoveries will rise though the actual loss faced by oil companies is unclear.
But PSU oil companies will face a liquidity crunch and will be forced to raise short-term borrowings.
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Political Impact National Strikes Escape clause for rise in subsidy
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Automobile Sector Diesel vs Petrol cars Decrease in car sales
“Annual car sales declined for the first time in 11 years in 2013 posting a 10 per cent decline to 18.07 lakh units. ”
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Inflation
Rough estimates show that a ten percent rise in the price of diesel (around Rs 5 per litre in Delhi) will raise inflation rates by 0.6 percentage points.
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Future
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Our Role Public Transport Bicycles Alternatives
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Summary Trend Reasons
Economic Political Social
Hoax of Subsidy Impacts
Govt budget Oil Companies Politics Automobiles Inflation
Future Our Role
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We Do Not Inherit the Earth from Our Ancestors; We Borrow It from Our Children
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