Hindu Buisness Line (web)Petroleum products used for transport of goods and mass transportation are essential commodities which should be made available at affordable prices for the common man.

Statement of Lok raj Sangathan, May 30, 2012

The UPA government has imposed a huge increase in petrol price on the common man by more than Rs 7.50 per litre. This is the steepest increase in the last 10 years. This will not only result in a massive increase in transportation and commuting costs. It will also lead to a general increase in prices of all essential commodities and services. There is also a plan to increase diesel, kerosene, CNG and LNG prices in the near future, which are definitely bound to push the common man to the brink.

What is the logic for this price increase? Who dictates this price increase?

Petroleum and natural gas Minister Jaipal Reddy, has justified this rise saying “If the rupee depreciates by one against the dollar, the OMCs (oil marketing companies) lose Rs. 8,000 crore annually”. But he has conveniently forgotten that while the rupee has been depreciating, the international prices of oil have also been falling.
Indian Oil Corporation ( IOC) chairman R.S. Butola has admitted that every dollar reduction in international oil price translates into a cut in product price by 33 paise. The international prices of oil have fallen by more than $10 per barrel in the past few weeks.

The crude price (WTI crude) in international market is now around $91 per barrel. If barrel is taken to be 159 liters then the cost of crude would be 31.5 rupees per litre. If we add the cost of refining crude which is around around 5.5 rupees per litre of petrol, the total cost should be Rs 37 per litre. Even if we account for a marginal increase due to transportation cost of crude, the government earns a huge amount in tax by selling petrol at around Rs 75 per litre. A part of this tax is transferred to oil monopolies as “subsidies” so that they can show a healthy balance sheet!

An article in Hindustan Times has revealed that each time, a consumer buys a litre of petrol in Delhi, the Centre gets richer by Rs. 14.78 and state government earns another Rs. 12.20!
In 2010-11 ( the latest figures available), the Centre and state governments netted a massive amount of Rs. 102,825 crores as taxes collected from the petroleum products we bought.
In all, the sector fetched an estimated Rs. 136,497 crore or 17% of the centre’s total tax and other revenues after adding up corporate income tax of oil companies, dividends, service tax, royalties on crude and other receipts.

About a half of these revenues, however, went back to oil companies to help them offset potential losses and remain profitable! This helped Indian Oil Corp (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) to post profits.

Thus, while the government is looting the common man through high taxes on petroleum products, it is also using part of these revenues to prevent the firms’ balance sheets from slipping into red.
Why is the government doing this jugglery? "At the global level, these companies are blue chip companies or Fortune 500 companies and we cannot allow their image to be affected at any cost,” said petroleum minister Jaipal Reddy!!

With the result that the combined profit after tax (PAT) of the three oil firms during 2010-11 stood at Rs. 10,531 crore and Rs. 13,050 crore in 2009-10.

What all this reveals is that using the pretext that the international oil price is going up and oil monopolies have to be compensated, both the government and oil monopolies are making super profits. The government decontrolled oil prices 2 years back precisely in the interest of these oil monopolies.

The petrol price hike and the impending hikes on diesel and cooking gas are a part of the steps being taken by the government to accelerate economic reforms and improve “investor sentiment”. These “investors” are the big Indian and foreign monopolies who have been demanding that the Indian government take several steps to improve their profitability in the Indian market.

Lok Raj Sangathan strongly condemns the lies and subterfuge of the government and oil monopolies in imposing this price increase on the people.

It demands that the price hike should be withdrawn immediately.
It demands that the government should fulfil its duty to supply essential commodities such as fuel at affordable prices to the people.
Lok Raj Sangathan demands that oil monopolies should not be allowed to fix prices on their own.

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