PROJECT SUBMISSION

SUBJECT: - CORPORATE TAX PLANNING (SEMESTER VI)

STREAM: - MFM 2017-20
PROF: - MR. AJAY SHARMA

TOPIC SELECTION:-
IMPACT OF CRUDE OIL PRICES ON THE INDIAN ECONOMY- SOMETHING
BIZARRE IS
HAPPENING IN WORLD OIL MARKET.
(TOPIC NO 10)

BELOW ARE THE GROUP MEMBERS

Sr. No Group Members Roll No’s

1 Rohit Kadam 19
2 Aishwariya Sudhakaran 20
3 Aditi Maladkar 27
4 Rohan Naik 30
5 Bhushan Parab 33
6 Arun Shinde 45
7 Mayur Veralkar 56

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 TABLE OF CONTENT

SR.NO PARTICULARS PG NO.

1 SUMMARY 3
2 OVERVIEW 4
INDUSTRY 4
CRUDE OIL PRICE 5
3 OBJECTIVE 6
4 INDIA CURRENT SCENARIO 7
5 DEMAND OF CRUDE OIL 8
6 SUPPLY OF CRUDE OIL 8
7 IMPACT OF CRUDE OIL PRICE ON INDIAN ECONOMY 9
RISING CRUDE OIL PRICES 10
FALLING CRUDE OIL PRICES 11
8 TAX SCENARIO 14
9 STATISTICS 16
10 HOW COMMAN MAN AFFECTED BY PRICE HIKE 18
11 MEASURES TAKEN (SOLUTION) – CRUDE OIL PRICE 19
12 CASE STUDY 20
13 CONCLUSION 24
14 REFERENCES 25

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 SUMMARY

It is evident to everyone how volatile the prices of crude oil and petroleum in the global
market are. Considering the fact that they are non-renewable source of energy and also
the fact that India has one of the highest energy needs in the world, it is not a cause of
surprise to anyone how volatile Indian Economy becomes whenever there is an increase
in the prices of oil anywhere.

Further considering the fact that government has given oil companies the power to decide
the price of petrol in the country which has alienated the public from the government. It is
to note here that during that one year period after the introduction of this policy by the
government the price of petrol rocketed higher.

The effect of which has been that the common man and middle class families now find it
hard to own a private vehicle. The cost of living has also increased and not to say about
the falling price of Indian rupee.

This project has tried to analyze the impact of the rising and fluctuating crude oil prices
on the Indian economy and how it is affected.

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 OVERVIEW

INDUSTRY
The Oil and Gas industry is among the eight center enterprises in India and assumes a
significant job in affecting dynamic for the various significant areas of the economy.

The legislature has permitted 100 percent Foreign Direct Investment (FDI) in numerous
fragments of the segment, including flammable gas, oil-based commodities, and
treatment facilities, among others. Today, it pulls in both local and remote venture, as
bore witness to by the nearness of Reliance Industries Ltd (RIL) and Cairn India.

The creation of Oil and Gas is the standard for the development of economy from
numerous points of view and functions as the foundation of Indian economy.

Diverse oil and gas organizations in India have been contributing towards the quick
development of the economy of India. They considerably offer business chances to
numerous crude material providers just as they are extraordinary wellspring of fuel
supplies.

Below are the list of Oil & Gas Industry industries in India:-
 Indian Oil Corporation
 ONGC
 Bharat Petroleum
 Reliance Petroleum Limited
 Essar Oil Limited
 Cairn India
 Gas Authority of India
 Hindustan Petroleum Corporation
 Oil India Ltd
 Tata Petrodyne

As of Mar 01, 2020 the oil refining capacity of India stood at 249.4 million tonnes, making
it the second largest refiner in Asia.

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CRUDE OIL PRICE
WHEN OIL PRICES MOVE UP :
 GDP is effected negatively.
 Inflation increases.
 Government spending on subsidy increases.
 Exports become weak.
 Foreign currency reserve deplete.
 Share market crumbles.
 Investment decreases.

Unrefined petroleum is the crude characteristic asset that is extricated from the earth and
refined into items, for example, gas, stream fuel, and other oil-based goods.

Raw petroleum was and remains the absolute most significant ware on the planet as it is
the essential wellspring of vitality creation.

Dealers in raw petroleum fates set costs by two components .i.e. is gracefully and request
and market assumption. Be that as it may, prospects costs can be a poor indicator since
they will in general add an excessive amount of difference to the present cost of oil.

Financial specialists may buy two sorts of oil contracts prospects agreements and spot
contracts. Individuals may put resources into oil as a theoretical resource, as a portfolio
diversifier

Business analysts and specialists anticipate the way of unrefined petroleum costs, which
are unpredictable and rely upon different circumstances. They utilize a scope of
estimating apparatuses, for example,
 Oil futures prices
 Regression-based structural models
 Time-series analysis
 Bayesian autoregressive models
 Dynamic stochastic general equilibrium graphs

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 OBJECTIVE

 To study the impact of the higher oil prices on the Indian economy in brief.

 To study and understand how the global situations are affecting the fuel prices in
India.

 To study how common people are affected by these price hike.

 To find a relevant solution for this problem.

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 INDIA CURRENT SCENARIO

India with 18 treatment facilities, right now has as surplus refining limit which has put India
among net oil based good exporter nations.

The Government is genuinely considering advancing India as a serious refining goal to

support send out market for oil-based goods as likewise coordinating it with the
petrochemical and synthetics organizations to create and trade higher income creating
esteem included items.

High raw petroleum costs in the global market and a practically stale local unrefined
petroleum creation has caused a channel on nation's outside trade holds. Other than
expanding local stores, India has effectively wandered abroad to procure oil and gas
resources and went into long haul Liquefied Natural Gas (LNG) contracts as measures
for improving vitality security.

Ingenuity of high oil costs and reliance on imported oil leaves India with some troublesome
decisions to make. The decision is between
 Passing on the cost increment to the customer.

 Rationalizing charges and different requires on oil-based commodities.

 Making the National Oil Companies (NOC's) bear the weight.

Over the long haul, the main reasonable arrangement to manage high worldwide oil costs
is to legitimize the taxation rate on oil items after some time evacuate abnormality if any
in the current evaluating instrument, acknowledge proficiency increases through rivalry at
the treatment facility door and retail costs of oil based commodities, and pass on the
remainder of the universal oil cost increment to purchasers, while remunerating focused
on bunches underneath the neediness line however much as could reasonably be
expected.

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 DEMAND & SUPPLY OF CRUDE OIL PRICE

Raw petroleum costs change rapidly in light of sequences of media reports, arrangement
changes, and vacillations on the planet's business sectors.

In February and March of 2020, unrefined costs quickened their decrease in response to
the covid-19 pandemic and a normal sharp drop sought after for oil. What is more,
significant oil makers neglected to go to a concession to creation cuts, fueling the issue.
By mid-March 2020, the cost of U.S. raw petroleum was fluctuating just around $30 per
barrel.

DEMAND

Solid financial development and mechanical creation will in general lift the interest for
oil—as reflected in changing interest designs by non-OECD countries, which have
developed quickly as of late.

Other significant elements that influence interest for oil incorporate transportation (both
business and individual), populace development, and regular changes.
For example, oil use increments during occupied summer travel seasons and in
the winters, when all the more warming fuel is expended.

SUPPLY

The flexibly unrefined petroleum is additionally controlled by outer elements, which may
incorporate climate examples, investigation and creation (E&P) costs, ventures, and
developments.

Because of advances in innovation that permit organizations to extricate oil from rock
purported shale oil the United States turned into the world's biggest maker of oil in 2018
and a significant wellspring of worldwide oil supplies.

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Apart from demand and supply factor Natural disasters & political instability are another
factor that can cause oil prices to fluctuate.

For Example,

when Hurricane Katrina struck the southern U.S. in 2005, affecting almost 20% of
the U.S. oil supply, it caused the price per barrel of oil to rise by $13.

In May 2011, the flooding of the Mississippi River also led to oil price fluctuation.

From a global perspective, political instability in the Middle East causes oil prices to
fluctuate, as the region accounts for the lion’s share of the worldwide oil supply

For Example,

in July 2008 the price of a barrel of oil reached $128 due to the unrest and consumer
fear about the wars in both Afghanistan and Iraq.

IMPACT OF CRUDE OIL PRICE ON INDIAN ECONOMY

With India bringing in more than 80 percent of its raw petroleum prerequisites, the nation
should dish out much less cash to purchase oil from abroad.

Low oil costs can diminish India's import charges as well as give a space to the
administration to build fuel charges, counterbalancing low direct duty assortment.

According to the past pattern, any extreme accident or spike in unrefined petroleum costs
work contrarily for the business sectors as it's an indication of aggravation in the interest
flexibly harmony. Be that as it may, the ongoing accident in unrefined is additionally joined
by monetary log jam over the globe due to covid-19.

The government’s challenge is more because India is heavily dependent on oil with 70%
being imported from abroad. An increase in oil prices will lead to a rise in petrol prices
which is something that the common man will not tolerate. The other problem is the rise
in petrol prices will affect the economy as the transportation of all goods and services will
rise. This will ensure high inflation and impact India’s growth rate. Economics aside, the
rise in oil prices is all set to be a ‘hot’ political issue as political parties get set for various
state elections.

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RISING CRUDE OIL PRICES
Here are 5 ways the rise in oil prices affects India:

Fiscal Deficit:
India imports 1.5 billion barrels of raw petroleum every year. This comes up to around
86% of its yearly unrefined petroleum necessity. Along these lines, the flood in unrefined
petroleum costs could expand India's consumption, accordingly unfavorably influencing
India's financial shortfall - the contrast between the administration's absolute income and
all out use.

Monetary shortage demonstrates the measure of cash the legislature needs to obtain to
meet its costs. An ascent in monetary shortage could contrarily influence the economy
just as business sectors.

Current Account Deficit (CAD):

The ascent in raw petroleum cost highly affects the Indian Current Account Deficit (CAD).
Computer aided design is a proportion of India's exchange where the estimation of
products and ventures imported surpasses the estimation of merchandise and enterprises
sent out.

Computer aided design basically shows the amount India owes the world in outside cash.
SBI report proposes that Indian's CAD could cross 2.5% of GDP for FY-19 (giving oil
value proceeds at $80 per barrel). Extending CAD further squeezes the rupee's an
incentive just as the remainder of the economy.

Sensex, Midcaps:

The Indian securities exchanges have confronted a ton of weight because of the ascent
in raw petroleum costs. Somewhere in the range of 1 and 24th May, 2018 alone, the
Sensex fell by 2.3%.In examination, the BSE little top and mid top records have had it
more regrettable with a drop of about 8%. With unrefined petroleum costs contacting $80
per barrel, there has been an auction in little top and mid top stocks.

Stocks:

A great deal of Indian organizations relies upon sound unrefined petroleum costs. This
incorporates tire, ointments, and footwear, refining and aircraft organizations. The
productivity of these organizations is antagonistically influenced because of higher info
costs.

This could adversely affect stock costs in the close to term. Then again, oil investigation
organizations in the nation could profit by an ascent in oil costs.

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Inflation:

Oil is a significant ware and it is required to meet residential fuel needs. Furthermore,
notwithstanding that, it is an essential crude material utilized in various ventures.

An expansion in the cost of unrefined petroleum implies that would build the expense of
delivering merchandise. This value rise would at long last be given to buyers bringing
about expansion.

Specialists accept that an expansion of $10/barrel in raw petroleum costs could raise
swelling by 10 premise focuses (0.1%).

FALLING CRUDE OIL PRICES

Indeed, even during the choppiness, falling raw petroleum costs can lessen India's
monetary torment. India went into the coronavirus-drove lockdown with a past filled with
a more extended than-anticipated stoppage, which may keep the legislature from
accomplishing its yearly objective on various fronts, including immediate and backhanded
duty assortments. Low unrefined petroleum costs can assist India with raising oil-related
assessments to balance different misfortunes. "Lower oil costs have three perspectives
to it — outer record, expansion, and government's income," The fall in oil costs will give
a pad to the economy from various points.

Here are 5 ways the fall in oil prices affects India:

Current Account Balance:

India is probably the biggest shipper of oil on the planet. It imports about 80% of its all-
out oil needs. This records for 33% of its absolute imports. Thus, the cost of oil influences
India a great deal.

A fall in cost would drive down the estimation of its imports. This helps thin India's present
record deficiency - the sum India owes to the world in remote money.

A fall in oil costs by $10 per barrel lessens the present record shortfall by $9.2 billion. This
adds up to almost 0.43% of the Gross Domestic Product - a proportion of the size of the
economy.

Inflation:

Oil value influences the whole economy, particularly as a result of its utilization in
transportation of merchandise and ventures. An ascent in oil cost prompts an expansion
in costs everything being equal and administrations.

It additionally influences all of us legitimately as petroleum and diesel costs rise.

Subsequently, swelling rises. A high expansion is terrible for an economy.

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It additionally influences organizations - legitimately on account of an ascent in input costs
and by implication through a fall in purchaser request. This is the reason the fall in
worldwide rough costs comes as a help to India. Each $10 per barrel fall in unrefined
petroleum value diminishes retail swelling by 0.2% and discount value expansion by
0.5%.

Oil Subsidy and Fiscal Deficit:

The administration fixes the cost of fuel at a sponsored rate. It at that point remunerates
organizations for any misfortune from selling fuel items at lower rates. These misfortunes
are called under recuperations. The government fixes the price of fuel at a subsidized
rate. It then compensates companies for any loss from selling fuel products at lower rates.
These losses are called under recoveries.

A fall in oil costs decreases organizations' misfortunes, oil sponsorships and accordingly
helps tight financial shortfall. Be that as it may, since diesel was as of late deregulated,
the fall in oil costs will probably have less impact on the administration's financial
shortage. In addition, the administration despite everything needs to pay for past under-
recuperations.

Rupee Exchange Rate:

The sharp fall in oil costs has brought about a more grounded rupee. The estimation of a
free money like Rupee relies upon its interest in the cash showcase. This is the reason it
relies, all things considered, upon the present record shortfall.

A high shortfall implies the nation needs to sell rupees and purchase dollars to take care
of its tabs. This lessens the estimation of the rupee. A fall in oil costs is, along these lines,
useful for the rupee.

Be that as it may, the drawback is that the dollar fortifies each time the estimation of oil
falls. This invalidates any advantages from a fall in current record shortage.

Credit Availability and GST rates:

The lower fuel costs will support purchaser spending and government's pay from extract
obligation. At the full-scale level, it impacts the financial deficiency, outer borrowings and
obligation position, as indicated by an investigator with a remote bank.

Credit rating offices prior said higher oil costs add to momentary monetary weights, which
would follow cuts in the GST on certain things and generally high increments in least help
costs for crops. It brings about the danger of higher monetary shortfall.

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Petroleum Producers:

The fall in worldwide oil costs might be useful to India, however it additionally has its
drawbacks. Straightforwardly, it influences the exporters of oil makers in the nation. India
is the 6th biggest exporter of oil-based commodities on the planet, as indicated by media
reports.

This causes it win $60 billion every year. Any fall in oil costs adversely impacts sends out.
When India is running an exchange shortfall - high imports and low fares, any fall in trades
is terrible news. Additionally, a great deal of India's exchange accomplices and
purchasers of its fares are net oil exporters.

A fall in oil cost may affect their economy, and hamper interest for Indian items. This
would in a roundabout way influence India and its organizations.

Midstream Sector:

The midstream area profits by its low ware value presentation and defensive agreements
for social affair, shipping and putting away hydrocarbons including the refining division is
adjusting the advantage of a sharp decrease in feedstock costs with the diminished
interest for fuel items in 2020.

Fall in unrefined costs is consistently positive for the Indian economy in any case,
showcase moves toward oil costs because a sharp fall consistently prompts stresses of
a worldwide downturn, which is not useful for the Indian market.

Be that as it may, in the long haul, at that point unrefined petroleum may ricochet again
from lower levels however the upside will stay constrained because of higher flexibly,
which will be a drawn out positive for the Indian market.

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 TAX SCENARIO

Crude Oil Prices are its Historic Lows by even going Negative in April 2020 and India has
been continuously doing Stockpile of 32 Million Tonne of Crude Oil in April 2020 and now
in May 2020 at such low rates so as to keep cost under control in near future, even if
Crude increases
But ever wondering despite of Low Crude Oil Prices - why Fuel Prices are high in India

Below is Crude Oil Cost Comparison

1st January 2020 6th May 2020
International Price of Brent Crude Oil with 67$ per Barrel 27.2 $ per Barrel
Ocean Freight (round off)
Currency Exchange Rate Rs 71.4 / USD Rs 75.8 / USD
Crude Oil in Indian Currency Rs 4784 Rs 2061
1 Barrel of Crude Oil 159 Litre 159 Litre
Crude Oil - Cost per Litre Rs 30.08 per Litre Rs 12.96 per
Litre

Apart from Crude Oil Rates - There are 2 Important Factors which determine the Fuel
Cost - VAT and Excise Duty - which is as below
Tax in Tax in Tax in May 2020
November August 2017
2014
Excise Duty on Rs 9.20 per Rs 21.48 per Litre Rs 32.98 per Litre
Petrol Litre (incl. Road Cess)
Excise Duty on Rs 3.46 per Rs 17.33 per Litre Rs 31.83 per
Diesel Litre Litre (incl. Road
Cess)
VAT on Basic Price 20% on Basic 27% on Basic Price 30% VAT
on Petrol Price
VAT on Basic Price 12.5% on 16.75% on Diesel + 30% VAT
on Diesel Basic Price 25p Cess

Taxes Paid for Obtaining Fuel (May 2020)

Tax Paid for Obtaining Total Cost of Fuel
Fuel
Petrol in Delhi Rs 49.42 per Litre (69.3%) Rs 71.26 per Litre
Diesel in Delhi Rs 48.09 per Litre (69.3%) Rs 69.39 per Litre

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Mumbai –

Reason Mumbai has highest State Level Taxes (VAT with additional Surcharge) and
petrol prices in March 2020 still over Rs 75 per Litre at Rs 76.31 per Litre. The
Excise+VAT+Surcharge in Mumbai is almost the highest making Maharashtra with
Highest Fuel Prices in India

COVID OUTBREAK – CRUDE OIL PRICE

Oil and gas makers need the administration to cut and concede burdens on yield and end
all value controls on residential gaseous petrol to assist organizations with managing the
twin stun of a worldwide gracefully overabundance and request fall because of the Covid-
19 pandemic.

A novel coronavirus is affecting countries in every habitable continent, with recent shocks
to oil prices only the latest wrinkle in the unfolding outbreak.
During trading on March 9, crude oil prices dropped to half what they were in January.
This is an example of an oil shock. A shock is a massive change — in this case, in the
price of a commodity that powers the global economy.
U.S. stock markets were down well over 5% by midday, with trading briefly halted and
crude oil stocks hit particularly hard. Crude oil is used to make vehicle gasoline, jet fuel,
heating fuel and to produce energy.
“My view is the downturn in the market is due to the virus,” says University of Oregon
associate professor of finance Rob Ready, author of “Oil Prices and the Stock Market,” a
February 2018 paper in the Review of Finance. “The oil prices are a sideshow.”

The oil shock, Ready says, is still adding uncertainty to equities markets already rattled
by the new coronavirus. Oil stocks are down and airline stocks continue to fall, too. Still,
he says it’s difficult to draw a stark line between this particular oil shock and recent
ongoing stock market losses — considering the context that the volatility is happening
alongside a global coronavirus outbreak.

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 STATISTICS – FACT’S AND FIGURES

CRUDE OIL - IMPORT

India Imports by country Last Previous UNITS MONTH

China 429.55 356.77 INR BILLION Jan 2020
United Arab Emirates 225.28 220.69 INR BILLION Jan 2020
United States 203.05 182.88 INR BILLION Jan 2020
Iraq 202.89 114.49 INR BILLION Jan 2020
Saudi Arabia 183.99 157.32 INR BILLION Jan 2020
Hong Kong 104.71 101.84 INR BILLION Jan 2020
Singapore 98.35 77.97 INR BILLION Jan 2020
Indonesia 82.36 146.88 INR BILLION Jan 2020
Russia 71.68 38.42 INR BILLION Jan 2020
Japan 70.88 68.76 INR BILLION Jan 2020
Switzerland 64.57 77.23 INR BILLION Jan 2020
Qatar 63.89 64.94 INR BILLION Jan 2020
Nigeria 60.91 39.75 INR BILLION Jan 2020
United kingdom 59.57 35.44 INR BILLION Jan 2020
Malaysia 55.58 56.89 INR BILLION Jan 2020
Australia 53.00 47.42 INR BILLION Jan 2020
Belgium 40.37 71.61 INR BILLION Jan 2020
Thailand 33.66 35.91 INR BILLION Jan 2020
South Africa 33.30 38.54 INR BILLION Jan 2020
Italy 28.85 26.73 INR BILLION Jan 2020

Imports of Crude Oil in India increased to 19.52 TONNE Million in March from
18.65 TONNE Million in February of 2020.

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CRUDE OIL – PRODUCTION

Crude Oil Production in India increased to 649 BBL/D/1K in January 2020 from
638 BBL/D/1K in December of 2019.
Crude Oil Production in India is expected to be 700.00 BBL/D/1K by the end of this
quarter, according to Trading Economics global macro models and analysts
expectations. Looking forward, we estimate Crude Oil Production in India to stand
at 700.00 in 12 months time. In the long-term, the India Crude Oil Production is
projected to trend around 701.81 BBL/D/1K in 2021, according to our econometric
models.

CRUDE OIL – IMPORT FROM CHINA

Imports from China in India increased to 429.55 INR Billion in January 2020 from
356.77 INR Billion in December of 2019.

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 HOW COMMON PEOPLE ARE AFFECTED BY THESE PRICE HIKE

There are a few items which influence the general public on an extremely enormous
scope as far as financial just as social fronts. Diesel, Kerosene and Cooking Gas go under
such classes. While Diesel is utilized in mechanical and horticultural work on an extremely
enormous scope, Kerosene and Cooking Gas have direct connection to the last family of
the nation. In this manner any expansion in the cost of these items straightforwardly
influences the life of normal individuals. The absolute first outcome of diesel climb is
increment in transportation charges that outcomes in increment in cost of practically all
wares and hence fuel expansion, which is now in twofold digit figure.

Besides climb in diesel cost straightforwardly increment the expense of creation of the
ranchers as diesel is utilized in practically all horticultural exercises from water system to
development and transportation. Any expansion in diesel cost consequently push
ranchers in reverse as there is no prompt alleviation, similar to increment in MSP
(Minimum Support Price) or expanded market cost to their yields, to them. Subsequently
any expansion in diesel cost has an extremely enormous effect on the general public and
most noticeably terrible influenced is the least fortunate segment. Increment in cost of
lamp fuel and cooking gas straightforwardly raise the cost of supper and light to the
residents coming about more issues for the general public previously thinking about value
rise and destitution

Cooking gas value rise likewise hamper Government's arrangement to advance the
utilization of clean energizes for cooking in rustic territories since individuals would not
lean toward expensive cooking gas to other less expensive local other options (for
example woods and uplas). Then again increment in petroleum cost doesn't have any
immediate effect on poor people, it raises the fuel charges of individual vehicles, therefore
power individuals to move to the next less expensive alternatives (for example diesel,
LPG) which again increment endowment trouble on the legislature and cause abuse of
appropriation given for government assistance of the common and destitute individuals.

As India import practically 75% of its oil needs, it isn't workable for the legislature to keep
up low costs of these wares for quite a while when cost of oil based commodities
increment step by step in the universal market. It would expand sponsorship trouble on
government and would bring about progressively financial shortage. Thus to control the
antagonistic effect, of such value ascend, on the conventional individuals we should
change our arrangements with respect to endowment and APM (Administered Price
Mechanism).

18
We ought to distinguish the need buyers and their need of a specific item and afterward
make a few squares of purchasers and choose sufficient and distinctive endowment rate
for them (diverse for each square according to their ability and need). Alongside this,
immediate exchange of sponsorship add up to their records will check abuse of
appropriations and lower the effect of such value ascend on the most powerless area of
the general public. Advancing utilization of whimsical fills for lighting and cooking (as sun
based force) will lessen the reliance on oil based commodities and along these lines
would likewise control the effect of value ascent of these items on the general public.
Hence clearly any climb in the cost of Diesel, Petrol, Kerosene and Cooking gas influence
the general public however by taking preventive and careful steps the effect on bigger
area can be diminished.

SOME MEASURES TAKEN TO CONTROL CRUDE OIL PRICE – SOLUTION

 The economy should be able to tide over consistent fluctuating oil prices resulting
from global geopolitical situations, by bringing in adequate measures to sustain the
economy from such crisis.
 The Government should try and introduce ways so that such hike in prices is not
swiftly pass on to the consumers.
 The country should be able to increase its own production of crude oil reserves so
that it will not be left dependent on oil producing countries.
 While increasing its own reserves, it will not only help the country become self-
sufficient but also help it to save valuable foreign exchange from leaving the
country.
 Introduction of Electric cars will help to combat high petrol prices.
 Use of public transport can be a good way of not being dependent on fuel prices.
 The Government should try to enter into alliances with friendly countries to try and
explore oil in other countries.
 The refining capacity of oil should be upgraded by creating more oil refining centers
in the country.
 Sugarcane farmers should change cropping pattern for producing biodiesel and
ethanol from sugarcane. Biodiesel is a renewable fuel and it produces less
pollution than using petroleum diesel fuel. Any vehicle that operates on diesel fuel
can use biodiesel – stated by Mr. Nitin Gadkari
 Prime Minister Narendra Modi said the NDA government has taken "decisive
steps" to bring down crude oil import by 10 percent and save precious foreign
exchange for the country.

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 CASE STUDY - OIL SHOCK VULNERABILITIES & IMPACTS: INDIA
PREPARED FOR THE UNITED KINGDOM DEPARTMENT FOR INTERNATIONAL
DEVELOPMENT-23RD NOV, 2012

The contextual analysis is sorted out as per five subsystems of the financial framework,
in particular:
 Energy
 Transport
 Agriculture
 Macro-economy
 Society

ENERGY
Oil's offer in TPES (23%) and over 28% of definite vitality utilization in 2010, of which over
70% is imported, compromises the nation's development through global oil cost and
gracefully stuns. Taking everything into account, rising oil costs will sooner or later start
to continuously hose request and result in less oil vitality being devoured in the nation,
particularly in the more drawn out term.

The costs of other vitality sources, particularly those that are somewhat or other
substitutable for oil –, for example, coal and gas – are probably going to ascend alongside
the oil cost. These value rises will thus squeeze the cost of power since coal is the
feedstock for about 70% of national force age. As per Coal India Ltd., transportation of
coal by railroads to coal-terminated force stations at present experiences extreme
infrastructural bottlenecks, while mining areas likewise experience the ill effects of poor
street network (Chaturvedi, 2012). The expenses of redesigning foundation for expanded
creation of coal-based warm force will increment somewhat because of rising fuel costs.
Purchasing or producing, moving, and introducing sustainable power source foundation,
including wind turbines and sun-oriented boards, will likewise increment because of
higher oil fuel costs. The increasing expense of elective vitality sources represents their
reliance on a financial framework that is itself subject to oil.

Intense physical deficiencies of oil items, which could emerge occasionally attributable to
worldwide flexibly interferences, could have more genuine outcomes than steadily rising
(or unpredictable) vitality costs. Vital oil saves are intended to ease worry over security of
oil supplies in crisis circumstances, for example, strife, common cataclysms, or an
unexpected spike in the universal cost of oil (Dutta, 2012). India does not have huge vital
oil saves which makes the economy exceptionally defenseless against oil gracefully
disturbances. Fundamentally, an abrupt interference of fluid fuel supplies could decline
the progression of coal to control stations, since over 70% of railroad cargo (the favored
type of coal transportation in the nation) runs on diesel, and further upset power age.

The flow administration of the vitality segment in the Indian political framework represents
a huge test in that different dynamic structures are in presence, with the possibility to

20
diffuse approaches to manage high powerlessness to oil cost and gracefully stuns. The
Government of India has a Ministry of Power, a Ministry of Coal, a Ministry for Petroleum
and Natural Gas and a Ministry of New and Renewable Energy. Viable coordination
among these different services will be basic to manage vitality security dangers in the
medium to long haul.

TRANSPORT

Transport foundation in India experiences a few issues. Two difficulties featured by the
Basic Roads Statistics of India are overabundances in street network and support of
street framework (MORTH, 2012a). Country streets included 356,000 km in the five years
from 2007-2011, of which just 38% are tar surfaced (MORTH, 2012a). Urban streets of
which around 71 of absolute length were surfaced as of March 2011, included an extra
11,000 km during a similar period. National Highways were included at the pace of 11km
per day during 2011 to finish significant street network ventures (NHAI, 2012). An extra
14,162 km of national thruways were under development as of September, 2012 (NHAI,
2012). Street development and support costs are powerless against oil value stuns, since
the bitumen utilized for surfacing cleared streets is gotten from unrefined petroleum. The
Indian street arrange is extraordinarily powerless against oil value climbs since street
length follows a developing pattern.

The portability of India's populace that depends on mechanized vehicle is exceptionally

powerless against oil value stuns, given the staggering dependence on fluid oil fueled
vehicles. This applies to clients of private engine vehicles and bikes just as transports
and omni-transports. Open vehicle frameworks, for example, rail fast travel is less
helpless since they are run on power, which in India is overwhelmingly (70%) got from
coal-based warm age plants (EIA, 2011).

Vulnerabilities can likewise be recognized on a geological premise. The greater part of

oil-based goods are expended in urban territories, because of the expanding
convergence of vehicles discovered there. Significant levels of urbanization are
expanding the sheer size of urban areas, which thus is expanding city suburbanites'
movement separations and times. Country streets have seen dynamite development long
since 1981, interfacing profound rustic territories to quickly modernizing urban
communities and towns. Without rail access, towns and their occupants are powerless
against turning out to be detached once more. Huge cargo volumes are conveyed over
the length and expansiveness of the country. Assembling focuses are situated in the
inside of the nation, expecting availability to mining towns, residential customers and to
global providers and buyers through the nation's beach front ports. Most extreme
residential cargo and traveler development happens along the Golden Quadrilateral and
its diagonals. The six traffic-overwhelming courses in the nation incorporate the endorsed
Western Corridor interfacing Delhi and Mumbai (1500km) and Eastern Corridor
associating West Bengal and Punjab (1800km) (Pangotra and Shukla, 2012).

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AGRICULTURE

Unmistakably Indian horticulture has gotten more vitality concentrated and current
patterns demonstrate that vitality reliance will increment further . An oil value stun will
likewise affect the agrarian segment through direct channels (more significant expenses
for diesel utilized in ranch hardware) and roundabout channels (power and urea for
composts and pesticides) (Sihag et al, 2002). What is more, rising vehicle costs will add
to the costs of compound sources of info, and raise the expenses of shipping produce to
food processors, wholesalers and markets. In the short run, oil cost related disturbances
will lessen ranch salary of ranchers. Over the long haul, a continued ascent in fuel costs
may change input-use and creation rehearses (Jha et al, 2012:65). Industrious higher oil
costs and deficiencies of oil may urge ranchers to return to more work escalated and
natural strategies for creation that depend less on oil based fills and pesticides, however
which may bring about a diminishing in yield temporarily (Wakeford, 2012). Innovations
which increment the eco-friendliness of cultivating hardware and arrangements for
advancing the utilization of sustainable power source (sun based and biogas-situated) in
the agrarian area would counter current oil-reliance, at any rate in the immediate vitality
part of creation. On the off chance that creation costs rise quicker than deals costs, at
that point horticultural yield will decrease. Higher farming yield costs will have genuine
ramifications for food security, destitution status and modern creation that is dependent
upon rural produce as an information (Jha et al, 2012).

Singular Indian ranchers are cost takers and cannot give cost increments to customers.
This opens ranchers to money related trouble if creation and transportation costs rise
excessively. The food grain cost list expanded by just 12% somewhere in the range of
2001 and 2006 while the cost records of diesel, power and composts expanded by 86%,
45% and 10% separately.

An unexpected lack of diesel in provincial territories of India would bargain rural exercises,
particularly on the off chance that it happens at the hour of planting or reaping. Ranchers
who need diesel for tractors and water system siphons would need to contend with cargo
organizations and private administrators of traveler transport. Fuel deficiencies would
likewise negatively affect the dissemination of cultivating items to handling offices and
markets in towns and urban areas. India as of now experiences a poor food dispersion
framework, which is given as the main source of significant levels of ailing health among
the nation's poor, notwithstanding independence in the creation of food staples.

MACRO-ECONOMY

The immediate effects of oil value stuns happen by means of higher fuel costs and have
resonations on a few significant macroeconomic factors. India is a value taker on the
global oil advertise, yet practices tact in giving worldwide oil value stuns to residential
costs. Locally, the downstream fluid powers industry is dependent upon broad
government guideline. Costs of oil fills (petroleum, diesel, lamp fuel and LPG) are
managed by the Indian Government, which forces different demands and burdens and
decides retail and discount edges, far beyond an 'essential fuel cost'. The regulated value
framework for oil in India is bolstered by appropriations, even as oil incomes establish a
sizeable segment of the all-out incomes for government. The oil go through arrangement
is under change, with significant ramifications for the effect of worldwide oil costs on

22
macroeconomic goals for development, swelling and value. The valuing of oil-based
goods was booked to be totally deregulated from April 1, 2002. In any case, it just
empowered the Oil Marketing Companies to 'uninhibitedly decide retail costs of some oil
based commodities dependent on a worldwide equality valuing equation, while the
administration kept on controlling the costs of other oil based goods' (Mandal et al, 2012).
Results show that deregulation of household oil costs over the twelfth Five-Year Plan
(2012-17), as is at present in progress, will diminish development while expanding
swelling. In any case, it will likewise bring about an improved financial deficiency and
hardly, the present record shortage. Because of halfway go through, in the medium to
long haul, an expanded endowment bill might lessen open venture, hence antagonistically
influencing development.

The fundamental fuel cost is affected by two essential factors: the dollar cost of unrefined
petroleum exchanged on worldwide markets; and the rupee/dollar swapping scale.
Instability in both factors has verifiably significantly affected the rupee named cost of oil.
Lately, the genuine cost of oil in rupees has ascended to about twofold the past record
level set after the subsequent oil value stun in 1979/80, to a great extent on account of
the drawn-out devaluation of the rupee against the dollar.

SOCIETY

Destitution renders individuals increasingly helpless against monetary stuns, including

rising vehicle and food costs. Moreover, a public portrayed by a high level of imbalance
can be relied upon to encounter more prominent social burdens and strains in the midst
of financial misfortune. The destitution headcount rate for India shows that the greater
part the populace lives underneath the World Bank portrayed neediness line. In 2010,
33% of the populace lived beneath $1.25 every day; while 69% of the populace lived
underneath $2 every day (World Bank, 2012). Among the lower center pay nations, just
the Republic of Congo, Nigeria, Zambia and Timor-Leste fared more terrible than India
as far as the level of the populace living beneath $2 every day. The Indian Planning
Commission as of late characterized the destitution line at a profoundly questionable
Rs859.6 of month to month utilization in urban zones, and Rs672.8 in country territories.

23
 CONCLUSION

The crude oil prices all across the globe have a significant impact on global economies
directly or indirectly. However, the increase in the crude oil prices results in increase in
almost all the consumable and non-consumable commodities.

Any positive change in the crude oil price has negative impact on the increment in GDP
of a country.

The Indian economy is not an exception to the impact of change in crude

oil prices. In India the demand for petroleum related products is increasing at a rapid pace
which results in increase in crude oil imports.

One of the most important factors that decide the future of Indian economy is the price of
petroleum products.

In case of any increase in crude oil prices a shock or impulse is visible which paves way
for strengthening energy efficient mechanisms in order to reduce the dependency on
petroleum products.

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https://www.livemint.com/news/india/how-much-tax-you-currently-pay-on-petrol-and-
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