The petrol price rise is a major issue dominating the media. IE dealt with this in detail in its October issue. We had analysed the reason for the increasing price in the editorial as also by an energy expert, Dr Bhamy Shenoy

1. Energy
24 Industrial economist OCTOBER 2018
All over the world, except for oil exporting countries, petrol and diesel are
taxed heavily. There are about 55 countries where petrol is sold above Rs.100
per litre with the highest being Rs.153 per litre in Hong Kong.
Things you should know about
petrol prices...
Petrol
Dr Bhamy V Shenoy
The Congress Party organised a nation-wide
bandh on 10 September to protest against the price
rise in petrol and diesel. It claimed that NDA has
‘looted’ Rs.11 lakh crore from ‘common man’ by
imposing high taxes on petroleum products. Most
opposition parties supported this offensive of the
Congress Party.
Coinciding with this development, India Today’s
article titled, “ Why Indian government exports pet-
rol at half the price we pay,” has caught the attention
of the public.
To be expected, the NDA blames the price rise on
international oil price increase, devaluation of ru-
pee and also points the finger at state governments
whose taxes increase with oil price unlike that of the
Central government.
Because of these different developments, it is but
natural that there is total confusion over the why of
the high price of petrol.
During the UPA rule, between 2005-06 and 2013-
14, the oil marketing companies incurred a loss of
Rs. 4.3 trillion by selling petrol and diesel below
cost. The NDA government collected additional
revenues of Rs. 4.4 trillion during its four-year rule.
NDA was able to do this by increasing duty on petrol
from Rs.9.48 per litre to Rs. 19.48 and for diesel from
Rs. 3.56 per litre to Rs. 15.33 per litre in small doses.
Is it a loot?
However, to refer to the collection of taxes as loot
and stating that the Indian government exporting
petrol at half the price we pay are perfect ex-
amples of ‘fake news.’ The implied implications
of the NDA government acting irresponsibly is
unfair. I am making this statement even at the risk
of being labelled a NDA stooge.
All over the world, except for oil exporting
countries, petrol and diesel are taxed heav-
ily. There are about 55 countries where petrol
is sold above Rs.100 per litre with the high-
est being Rs. 153 per litre in Hong Kong. The
petrol price chart shows the product cost as
Rs. 39.21/l and total taxes at Rs. 37.09/l.
Taxes on petrol and diesel can be reduced.
But it has to be followed by lowering subsidies
and funding welfare projects. Or the public sec-
tor oil companies can be forced to lower prices
and incur losses. No one likes paying taxes if
they can avoid it. We know how a small per-
centage of India’s population pays income tax.
How can any government provide essential ser-
vices (defence, police, health, education, water
supply, power...) and take up welfare projects if
it does not have access to adequate funds?
DOES the ‘common man’ consume petrol?
It is not the ‘common man’ (another fake news)
who is hurt as a result of the higher petrol price as
claimed by the political parties. Who is this com-
mon man?
Who consume petrol? The owners of cars,
SUVs and two-wheelers. When 30 per cent of
Indians are below the poverty line and roughly
20 per cent are just above the poverty line who
cannot afford cars and two-wheelers, is really the
common man suffering due to a high petrol price?
Can there be free lunch for the haves?
Take India Today’s rhetorical thunderbolt. Is
Indian government genuinely exporting petrol
at half the price we pay by depriving the com-
Representative petrol prices
since Jan 2018 for Delhi
Is the Indian
government
exporting
petrol at half
the price we
pay?

2. Industrial economist OCTOBER 2018 25
Energy
mon man here? It is true the export price is
around Rs 39/l, and the current price in Chennai
is close to Rs 86/l. A country can tax internal
consumption, but cannot tax products for ex-
port. The pundits at India Today should be
aware of this simple fact.
A company like Reliance which has set up
sophisticated refineries, buys inexpensive heavy
and high sulphur crude oil, refines it to high
value petrol and diesel and exports to profit. Cur-
rently, India has a surplus of 11.6 million tonnes
(MT) of petrol and 26.8 MT of diesel and imports
13.1 MT of LPG. It is advantageous for India to
export petrol and diesel to pay for at least a por-
tion of the cost of crude and LPG imports.
Protest, a great game
Unfortunately, protesting against any petrol price by
political parties has become a Great Game to gain
political capital. While in opposition, NDA also played
this game. Actually, it is the consumer movement,
yet to take strong roots in India, that should be in the
forefront to demand competition among oil companies
to bring down petrol prices.
The pricing formula based on import parity adapted by
oil companies has killed competition in petroleum mar-
keting. Why should petrol be sold at the same price at all
stations in every city? It should be decided by competition
among the oil companies. Political parties should protest
against such consumer-unfriendly practices instead of de-
mandingareductionintaxes,whichwillhurtthecommon
man. And look at the vast differences in state taxes: VAT in
Maharashtra is around 42 per cent, in Goa it is 17 per cent
and in Karnataka 30 per cent on the cost of oil.
These issues should be debated not in the streets of
India by organising bandhs but in the parliament and state
assemblies. n
Representative global petrol prices in Rs per litre
The 111 year company Tata Steel (TSL) has for
long been, focusing in India on organic growth,
expanding capacity at Jamshedpur and at Kalinga-
nagar, Odisha.
The adventurous attempts of several Indian steel
companies to embark on building ambitious ca-
pacities beyond their own resources, had resulted
in widespread sickness. The tough action by the
government to recover large amounts of bank funds
blocked with these through the IBC provided the
opportunity for Tata Steel and several others. The
steel giant earlier completed acquisition of Bhushan
Steel. The proximity to the Tata Steel’s Kalinganagar
One more precious acquisition by TSL
plant is among the synergies of such acquisition. The recent
agreement to acquire the million tonne special steel plant
of Usha Martin Ltd (UML) near Tata’s existing plant at Jam-
shedpur, appears another brilliant move.
Even while steel majors are interested in acquiring
capacity through the National Company Law Tribunal
(NCLT),thiseffortofTataSteeltoaddfreshcapacitythrough
direct negotiations should be welcome.
Usha Martin’s product range including alloy steels and
long products with good custom in the automobile sector
would add to the strengths of Tata Steel in selling sophis-
ticated products with ready custom. Added attractions
of the new acquisition are UML-owned iron ore mines in
operation and its cap-
tive power plant. UML
also has a coal block
under development
which should be of spe-
cial value to Tata Steel’s
well-integrated opera-
tions from raw material
to finished steel prod-
ucts. Just in about a year
the TSL has added 50
per cent to its existing
Indian capacity! –SV