Indians pays for fuel-price imbroglio

The Indian government’s decision to raise the retail prices of petrol and diesel marginally by 2 rupees (5.5 US cents) and 1 rupee a liter in February, did little to untangle India’s oil price imbroglio. The country’s consumers have to pay prices that, even subsidized, are among the highest in Asia for the fuel yet oil companies nurse record losses that are put at US$88 million daily.

India is not alone in raising the retail price of fuel. China raised fuel prices by 10% last November, while transporters in Pakistan have threatened to go on indefinite strike after the government raised fuel prices this month and the Oil and Gas Regulatory Authority rejected petitions challenging the increases for fuel and cooking gas.
The government is largely responsible for India’s high prices, as the oil ministry confessed to Parliament in March 2007. India’s combined tax of 52% on petroleum products compares with 45% in Japan; 34% in Canada, 18% in the US, 39% in Pakistan and 36% in Thailand, India’s Petroleum Ministry informed India’s parliamentary upper house, the Rajya Sabha.

India’s civil aviation industry, among the sectors hardest hit by high fuel taxes, has already complained of losses of $694 million expected for the year ending March 31, due to taxes on aviation turbine fuel causing fuel bills to gobble up 40 % of operating costs.

The oil arithmetic means things may get even worse. India’s recent price increase was based on a global price of $77 a barrel of crude oil, while prices recently crossed $110 a barrel, a jump of over 100% in two years. Inevitably, India’s fuel import bill shot up to $54 billion in 2006-07 from $42 billion in 2005-06.

India is hit by the double squeeze of domestic oil demand rising by an average of 10% annually, while being dependant on imports for 75% of its oil needs. Against domestic consumption of 146 million tons of crude oil for year 2006-07, India internally produced a mere 34 million tons, according to the Petroleum Ministry, against the targeted production of 35 million tons.

The import bill will continue to mount. India’s passenger car market, for instance, is expected to grow by 16% in the coming 12 months, the New Delhi-based Society of Indian Automobile Manufacturers informed Reuters news agency. Auto majors such as Honda Motors have termed India’s car market “the most exciting in Asia”.

Asia Times