India Energy Conference 2008
Product Pricing
October 3, 2008
PwC
Transport Fuel Prices in India vis-à-vis Others
Countries price fuels for reasons like collection of revenue or restricting use
for environmental control. Many countries price fuels more than India.
UK
Turkey
Turkey
Netherlands
France
Korea, South
Netherlands
Germany
Hong Kong
Israel
Australia
Brazil
Georgia
India
Brazil
Pakistan
Korea, North
Armenia
Cambodia
Australia
India
Sri Lanka
Tajikistan
Georgia
Nepal
Jordan
USA
Uzbekistan
Russian Federation
Tajikistan
Thailand
Russian Federation
Diesel Price Nov 2006
in US Cent per Litre
Singapore
China
Kyrgyz Republic
Gasoline Price Nov 2006
in US Cent per Litre
Lebanon
Thailand
China
Vietnam
Vietnam
Kazakhstan
Kyrgyz Republic
Jordan
Syria
Azerbaijan
Malaysia
Oman
UAE
Kuw ait
Oman
Qatar
Kuwait
Syria
Qatar
Iran
Iran
Turkmenistan
Turkmenistan
0
50
100
Source : GTZ, International Fuel Prices 2007
Product Pricing & Subsidies
PetroFed & PricewaterhouseCoopers
150
0
50
100
150
October 2008
Slide 2
Comparison of fuel prices across countries
India passes on less price to consumers than in developed world. Worst, the
oil companies recover much less out of that.
Ex-tax Price & Taxes [Q1 2008]
Gasoline
Diesel
UK
Italy
Italy
Germany
Germany
UK
France
France
Spain
Spain
Japan
Japan
Canada
Canada
USA
India
India
USA
0
0.5
1
1.5
2
2.5
0
0.5
(USD per litre)
Ex-tax price
Product Pricing & Subsidies
PetroFed & PricewaterhouseCoopers
1
1.5
(USD per litre)
2
Tax component
Source: IEA Statistics Energy Prices and Taxes: First Quarter 2008
Note :The term Gasoline as used here refers to the Regular Unleaded Gasoline.
October 2008
Slide 3
2.5
Comparison of fuel prices- India and China
Petrol RSP has not increased with increase in crude prices due to lowdegree of pass-through. China, however, has much better pass-through ratio.
Units
India
China
Retail selling price of Gasoline
(2004)
USD per litre
0.74
0.39
Retail selling price of Gasoline (2008)
USD per litre
1.18
1.43
USD per litre
0.21
0.21
USD per litre
0.75
0.75
Change in Retail selling price of
Gasoline (2004-2008)
%
58
267
Change in Retail selling price of
Crude oil (2004-2008)
%
256
256
0.23
1.04
Fob Crude Oil Price (Dubai )
(2004)
Fob Crude Oil Price (Dubai )
(2008)
Pass-through ratio
Source: IEA Statistics Energy Prices and Taxes: First Quarter 2008; PPAC-Oil Prices and Taxes, GoI(2008)
Product Pricing & Subsidies The pass-through ratio is the ratio obtained by dividing the % change in RSP of gasoline during the period
2004-08 by the % change in crude oil price for the period 2004-08
PetroFed & PricewaterhouseCoopers
October 2008
Slide 4
Comparison of fuel prices- India and China
In case of Diesel as well, China has not hesitated from passing on the cost of
crude oil to consumers.
Units
India
China
Retail selling price of Diesel
(2004)
USD per litre
0.48
0.40
Retail selling price of Diesel (2008)
USD per litre
0.81
1.08
USD per litre
0.21
0.21
USD per litre
0.75
0.75
Change in Retail selling price of Diesel
(2004-2008)
%
69
169
Change in Retail selling price of Diesel
(2004-2008)
%
256
256
0.27
0.66
Fob Crude Oil Price (Dubai )
(2004)
Fob Crude Oil Price (Dubai )
(2008)
Pass-through ratio
Source: IEA Statistics Energy Prices and Taxes: First Quarter 2008; PPAC-Oil Prices and Taxes, GoI(2008)
Product Pricing & Subsidies The pass-through ratio is the ratio obtained by dividing the % change in RSP of diesel during the period
2004-08 by the % change in crude oil price for the period 2004-08
PetroFed & PricewaterhouseCoopers
October 2008
Slide 5
Burden sharing mechanism
Recent BKC pricing committee report has proposed to enlarge the ambit of
stakeholders to share the burden and insulate consumers.
STAKEHOLDERS
CENTRAL GOVT
STATE GOVT.
OIL COMPANIES
CONSUMERS
Customs Duty
Sales Tax
Upstream NOC/
Nomination block
PDS Kerosene
Subsidised
Excise Duty
GST (?)
Private players
Pre NELP blocks
LPG
Subsidised
Direct taxes
Pollution Cess
(from Feb 2008)
Private players (?)
NELP blocks
Petrol, Diesel
Controlled price/
Capped
Subsidy
Metro Cess
Refineries &
Marketing
Public sector
Other Petro-products
Free market price
Oil Bonds
Product Pricing & Subsidies
PetroFed & PricewaterhouseCoopers
Refineries &
Marketing
(Private sector)
October 2008
Slide 6
Burden sharing mechanism
Assistance from Centre is approaching limits and States do need revenues.
The imperative is to take tough decision to pass on to consumers.
50000
2004-05
2005-06
2006-07
2007-08
Rs Crore
40000
30000
20000
10000
0
State
Upstream
OMCs
Dealers
Centre
Rs Crore
0
10000
20000
30000
40000
Product Pricing & Subsidies Source: Petroleum Planning and Analysis Cell (PPAC), GoI (2008)
PetroFed & PricewaterhouseCoopers
October 2008
Slide 7
Conclusions
For healthy growth of oil industry infrastructure and competitive market, GoI
must enact milestones for moving to free market pricing in next 3 to 5 years.
• Allow economic value of fuels to be seen in prices;
• Bring fuels under classical VAT and in future under GST;
• Subsidize BPL families through direct subsidy mechanism;
• OMCs be relieved of financial burden;
• Agree to market-determined fuel pricing; and
• Legislate roadmap to market pricing through.
Product Pricing & Subsidies
PetroFed & PricewaterhouseCoopers
October 2008
Slide 8
Thank you
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