Chapter -1 final last new font final - petrofed.winwinho...

More documents

Recommendations

Info

www.petrofed.org like ONGC, GAIL and OIL. The remaining losses investment sentiment and this could lead to a very on account of under-recoveries were borne by the negative situation for a growing economy like OMCs themselves 20.9 percent. India. The financial performance of the Public Sector When viewed in retrospect, the picture could have OMCs is very telling. The three OMCs (IOCL, been really dismal for the OMCs had it not been HPCL and BPCL) taken together have posted for the external financial assistance extended to aggregate pre-tax losses of Rs.11,870.14 crore them by the Centre and the E&P companies. The during the period April-September 2008 for the OMCs would actually have posted huge losses or financial year 2008-09 as against profits before record lower profits in last four years as a result of tax of Rs.10,624.12 crore for the corresponding single-handedly shouldering the financial burden period during the last fiscal (Figure 4). As a result, of unprecedented increase in under-recoveries downstream marketing companies will face (Figure 5). (Rs. crores) severe liquidity crunch and encounter problems in meeting their day-to-day expenditure due and severely impact the investment plans. A weakened petroleum sector would lead to dampening of (USD million) -5000 -10000 -15000 -20000 -25000 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 5000 0 Figure 5: Cash profits / losses of Public Sector Oil Marketing Companies in absence of any external financial assistance Cash Profits/Losses of Public Sector Oil Marketing Companies in absence of any external financial assistnace 2004-05 2005-06 2006-07 2007-08 (Year) Source: BK Chaturvedi Committee Report, 2008 0 30 Macro-economic impacts IOCL HPCL BPCL The crude oil price increase over the last four years has significantly impacted the country's Balance of Figure 6: Net POL imports as a percentage of India's Total Exports Net POL imports as a percentage of India's Total exports 2004-05 2005-06 2006-07 2007-08 (April- 2008-09 (April- Sep) Sep) (Year) Source: Petroleum Planning and Analysis Cell (PPAC) - Oil Prices and Taxes, GoI (2008); Ministry of Commerce, GoI (2008) 60% 50% 40% 30% 20% 10% 0% (per cent) Net POL Imports Net POL Imports as % of India's total exports
31 www.petrofed.org Payments situation. For the period April- petroleum products, food and fertilizer, is likely to September 2008, the net Petroleum Oil and be in the range of approximately 6 to 7 percent of Lubricants (POL) imports were almost half of GDP. Together with State fiscal deficits in the order India's total commodity exports, as against 32 of 2 to 3 percent of GDP, the combined true fiscal percent for the corresponding period in 2007-08, deficit is clearly going to be in the range of 9 to 10 thereby implying that a sizeable chunk of export earnings is used to finance import of petroleum percent of GDP. products (Figure 6). Burden sharing by stakeholders Decontrolling the petroleum product prices will attract huge investments in the refineries. The high crude oil prices will result in significantly higher margins for these refineries. Increased earnings from exporting the value added by these refineries can compensate for the rising oil import bill and make the BoP situation more favourable. The government's continued failure to gradually adjust domestic oil prices to international realities is expected to result in a burgeoning fiscal deficit. In the present system the transfer of oil bonds to OMCs is off the budget. It does not affect the fiscal and revenue deficits of the central government at the time of transfer as the issue of oil bonds is not accounted for in the Government budget. When a distress situation arises, the Government takes up evaluation of burden sharing amongst stakeholders. The main stakeholder remains the Central Government – the exchequer collecting taxes, the share-holder of downstream and upstream companies collecting dividends and the funding source of subsidies through budget allocations and oil bonds. Other stakeholders are State Governments who collect taxes, consumers who pay for fuel, downstream companies who have been made to bear under-recoveries, upstream oil companies who have been made to forego their profits and finally the dealers operating retail stations who are remunerated through commissions (Figure 8). However, the petroleum product subsidies, which is the aggregate of subsidies on PDS kerosene and Domestic LPG provided from the Government budget and the implicit subsidies provided The debate over how much to pay the oil companies to make up for these under-recoveries would never end, and as a result oil companies would stand to lose. Various committees through issue of oil bonds as a percentage of the appointed by the Government in the past have total revenue collected by the Central suggested several mechanisms for sharing the Government through excise duties and levies on under-recoveries of the oil companies, but these petrol, diesel, PDS kerosene and domestic LPG, have increased to 82 percent in 2007-08 from a meagre 7 percent in 2004-05 (Figure 7). have not been adopted in practice by the Government. With market-determined pricing of petroleum product prices in place, the oil (Rs. crores) Figure 7: Petroleum Product Subsidies as percentage of Revenues of Central Government from Petrol, Diesel, PDS Kerosene and Domestic LPG 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Petroleum Product Subsidies as a percenatge of Revenues of Central Government from Petrol, Diesel, PDS Kerosene and Domestic LPG 2004-05 2005-06 2006-07 2007-08 (Year) Source: Petroleum and Natural Gas Statistics 2008, Ministry of Petroleum and Natural Gas, GoI; PPAC-Oil Prices and Taxes, GoI (2008) According to expert estimates, central fiscal deficit after taking into account implicit subsidies on 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% (per cent) Revenue accruing to Central Government Fiscal Subsidy from Budget on PDS Kerosene and LPG and Oil Bonds issued by Central government Petroleum Product Subsidies as % Revenue companies would be spared from the burden of reporting their under-recoveries to the
Page 1 and 2: PetroFed THE JOURNAL OF PETROLEUM F
Page 3 and 4: As I sit down to pen this piece, th
Page 5 and 6: India-The Energy Scenario Refining
Page 7 and 8: 5 www.petrofed.org Yield and Produc
Page 9 and 10: 7 www.petrofed.org offers potential
Page 11 and 12: Bob MacKnight Lead Analyst, PFC Ene
Page 13 and 14: Rajiv Puri Associate Director, Advi
Page 15 and 16: Dr. Siddhartha Mukherjee Group Lead
Page 17 and 18: 15 www.petrofed.org pass liquid. pe
Page 19 and 20: Big deals in retreat Gas grabs top
Page 21 and 22: Australia & Asia-Pacific 19 www.pet
Page 23 and 24: 21 www.petrofed.org • Project Sco
Page 25 and 26: 23 www.petrofed.org means of excell
Page 27 and 28: 25 www.petrofed.org reboiler for an
Page 29 and 30: 27 www.petrofed.org a script for fa
Page 31: 29 www.petrofed.org and Hindustan P
Page 35 and 36: Ghana, Indonesia and Jordan all rec
Page 37 and 38: 35 www.petrofed.org The PetroFed pa
Page 39 and 40: "Energy and Climate Summit" (L-R):
Page 41 and 42: Mr. Amit Yadav, Director, Departmen
Page 43 and 44: Mr L N Gupta, Jt. Secretary, MoPNG
Page 45 and 46: Session Chairman Mr. Suresh Mathur,
Page 47 and 48: Mr. S. Behuria Chairman Chairman, I

Chapter -1 final last new font final - petrofed.winwinho...

Create successful ePaper yourself

Delete template?

Save as template?