Government

is
Introduction
Responsible
for Rise of
Petrol Price
in India

1
What are we Paying now ?

2
Real Culprits
1. Taxes on petrol and not subsidy by government.
2. Use of Import Parity Pricing and not Production Cost Based Pricing.
3. OMC’s which are also regulated by government.
4. Reservations in petrol pumps allocation in India by Government.

3
1. Deception/Hoax of Subsidy by Government
There is absolutely no subsidy on petrol either by government or by
OMCs.
In fact Government has a revenue of worth billions from various taxes
levied on Petroleum products.
Government is levying approximately more than 30% taxes on petrol.
Last Year its Contribution was as much as Rs. 1,350 Billion.

4
2. Import Parity V/s Production Cost
Based Pricing
Import Parity pricing means fictitiously assuming petrol has been
imported (at Singapore market rate) and then fictitious duties, insurance
and freight is levied on it.
The difference between import parity price thus (fictitiously)
determined and actual selling cost is termed as under-recovery.
For e.g., if import parity price is Rs. 90 and a liter is sold at Rs. 80 then
Rs. 10 is the under-recovery.
Our demand is import parity pricing should be replaced with production
cost based model.

5
Production Cost of Petrol ?
Cost of Petrol Includes Production Cost

1. Crude Oil Other Costs

20%
2. Refining
Crude Oil
3. Refining margin 80%

4. Transportation
5. Vendor commission
Crude Oil Other Costs

6
Now Concentrate on Calculation
1 barrel of crude oil yields 150 litre of petrol
Average value of dollar this year (Jan to May) = Rs. 56
Average price of crude oil barrel this year = $110 as per Pranab Mukherjee
Refining, margin, transportation, commission per barrel = Rs. 672/barrel
150 litre of petrol = 110 × 56 + 672 = Rs. 6832
i.e. 1 litre of petrol = 6832 / 150 = Rs. 46
The selling price depends on factors like quality of crude oil, refinery. However
changes in it would not greatly affect product price.
But if we take rough figures also there is more 30% taxes on petrol

7
3. OMC’s are not suffered by any losses
Oil Marketing Companies (OMC’S) did not suffer with losses,
actually they earn tripled or quadrupled profits from Last year.
Figures of some OMC’s are as follows : -
Company Quarter 4, 2011 Quarter 4, 2012 Profit Growth
(fig. in crore) (fig. in crore)
Indian Oil Corporation 3,905 12,670 224%

Bharat Petroleum 935 3,962 324%

Corporation Ltd.
Hindustan Petroleum 1,123 4,630 312%
Corporation Ltd.

8
Holding of Government in OMC’s
Company Government holding Private holding
IOC 78.92% 21.08%
HPCL 51.11% 48.89%
BPCL 54.93% 45.07%
ONGC 69.23% 30.77%
GAIL 57.34% 42.66%
Oil India 78.43% 21.57%

9
4. Reservation in Petrol pump allocation
CATEGORY CURRENT
QUOTA
SC/ST 25%
OBC 0
GENERAL 50%
DEFENCE PERSONNEL 8%
FREEDOM FIGHTERS 2%
PARA-MILITARY PERSON 8%
SPORTSPERSON 2%
PHYSICALLY HANDICAPPED 5%

10
As you can see that there is shortages of supply for General Category and
we all are aware of the economic fact that shortage in supply leads to
increase in price of any product

Equation for this could be :-

Decrease in Supply = Rise in Price

11
Other Reasons For Increase In Petrol
Prices
Less amount of conventional resources and high demand.
Breakdowns and failure in the OMC plant causing them to recover
their money.
High amount of import from the foreign countries.
Rising population of the country.
Magical increase in no. of petrol vehicles

12
Our Responsibility
 Government is always blamed for ever increasing petrol prices but
somewhere we people are also responsible for high oil prices.
It is our duty also to see how we can contribute towards reduction
in oil prices.
 We must keep in mind that oil is not extracted in our country, so
we should try to preserve our resources and use them in a
sustainable manner.

13
SIMPLE SOLUTION
DECREASE IN CONSUMPTION=DECREASE IN DEMAND=DECREASE IN PRICE

14
How can efforts be made to reduce
petrol price by Government?
1. Government should increase the number of public transport
vehicles with high security.
2. Government should maintain the roads good and safe for vehicles.
3. Traffic police must also work hard to clear traffic jam on roads
because most of the fuel will be utilized by the vehicles in the
traffic.
4. Promote bio-diesel.
5. Should promote companies which makes low petrol consuming
vehicles.

15
6. Should make bridges so that chances of traffic may get reduced.
7. Government can help the companies which are trying to manufacture
Electric scooters by funding these companies.
8. Reduce the rate of taxes.
9. Invest funds in R & D department of Renewable Energy Sources.

16
Steps to be taken by us for reduction
in Petrol Wastage?
1. For shorter distance we must go by walk or by bicycle.
2. People of same destination and same work must encourage CAR
pooling.
3. We must try to use public transportation facilities
4. Drive wisely, Put off engines while there is a red signal traffic
lights.
5. Try to research and invent substitute of petrol like bio gas and
electronic bike

17
6. Stop using vehicles for showing status.
7. We should focus on use of biotechnology and solar energy sources.
8. Use CNG or diesel vehicles which can limit the use of oil in
transport.

18
CONCLUSION
Coming to an end with the most important point we would say that
Government is not solely but highly responsible for rise in petrol prices in India,
as they are not ready to reduce taxes on petrol.
Petrol prices are also depends upon rate of dollar in India as Indian peoples are
using lots of Foreign products whose selling prices are very much higher than
their cost prices.
E.g. Coke of 600 ml is sold at Rs. 25/- whether its cost is only Rs. 5/-
Urgent need to create an awareness among people about this issue.
Crude oil is very limited and a non-renewable resource, so it is our
responsibility to preserve it for our future generations.
Thus, its use should be minimized and should be preserved.

19
Bibliography
We here by declared that this data about the topic is taken from the following:-
1. www.google.co.in
2. www.google.co.in/images
3. Google Blogs
4. Articles

20
 21

Presentation by :-
1. Simran Kalra
2. Vivek Kumar
3. Prashashti Goyal
4. Megha
5. Neena
6. Kirti Jain
PRESENTATION BY :- VIVEK, SIMRAN, PRASHASTI, MEGHA, NEENA & KIRTI 22
 23

End of the Slide…