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Pricing reforms for the Petroleum Sector

Industries Limited. Pricing reforms for the Petroleum Sector. 26 th July 2006. RIL’s Existing Refinery At Jamnagar, Gujarat. GoI Policy. Ground Realities. Petroleum Pricing – Intent vs Reality. GoI control on the Prices

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Pricing reforms for the Petroleum Sector

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  1. Industries Limited Pricing reforms for the Petroleum Sector 26th July 2006 RIL’s Existing Refinery At Jamnagar, Gujarat

  2. GoI Policy Ground Realities Petroleum Pricing – Intent vs Reality • GoI control on the Prices • Subsidy on MS & HSD in additional to SKO & LPG • Complex and opaque subsidies • Subsidies available only to PSUs killing Competition • Market Determined Pricing for MS & HSD • Subsidy only for LPG & SKO • Transparent subsidies • Level Playing Field for all Players Driving Private Sector out of Petroleum Marketing

  3. Non Level Playing Ground Private Companies are left with an Under Recovery of Rs 3.39 / Litre on MS and Rs 5.77 / Litre on HSD ?

  4. Under Recovery : Our Estimates More Government Support UNAVOIDABLE

  5. Co-existence taxes & non transparent subsidies Co-existence of taxes and non-transparent subsidies – Lowering of taxes or, alternatively issue of oil bonds to all players in proportion to domestic sales.

  6. Reduction in Excise Duty Alternative to Additional Bonds is Reducing Duty

  7. Can we reduce Sales tax as well ? • Uniform Sales Tax / VAT in States eliminates cross border distortions

  8. To Conclude….For Oil Industry to Survive • Energy is critical and needs critical corrective steps for a sustainable future • For a robust Oil Industry avoid opaque and partisan subsidies by: • Reducing Excise Duty on MS and HSD • Levying Specific duty on MS and HSD • Reducing the Sales Tax levels • Introducing uniform levels of sales tax/VAT on petroleum products in all states

  9. Q&A Thank You

  10. RSP was increased to maintain a differential of Rs 2.50 per Litre in both MS and HSD Options for a Private Company Continue Marketing & Continue Absorbing Losses • Market Share dropped to <2% from 15% • Company Investment of 4000 Crores and Dealer Investment between 1.5 - 2 Crores per RO : Idling • Transporter (3745 Trucks) Investment of Rs 524 Crores Idling • 55,000 Jobs at Risk • Competition will die • Consumer expectation on world class Q & Q will die a premature death OR Reduce Volume Increase Prices

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