Crude and Petroleum
Are you wondering why the petrol prices are keep increasing day by day and you don’t understand why? Are you eager to know what are the reasons behind the increase in price of petrol even when crude price is very low? Here we provide you with insights analyzing the information of past two decades. Come let’s see it in details!
Import:
India is a major importer of crude and petroleum products in the
world. India’s demand for the crude oil is increasing every year as we can see
in the chart for last two decades the import of crude and petroleum products
increases year by year which indicates the rise in demand of the petrol and
diesel in India. India stands third in the crude oil imports next to China and USA
with 9.7% of total import in the world.
Indian basket of crude represents sour grade (Oman and Dubai
average) and sweet grade (Brent) with import ratio of 75.50:24.50 respectively in the year 2019-2020. India imports crude oil from
countries like Qatar, Kazakhstan, Russia, Algeria, Malaysia, Angola, Iran,
Mexico, United States, Kuwait, Venezuela, Nigeria, United Arab Emirates, Saudi
Arabia and Iraq these 15 countries account for nearly 92% of import in 2019.
The top 5 countries are listed below
- Iraq – US$ 21 Billion
- Saudi Arabia - $ 20.5 Billion
- United Arab Emirates - $ 9.9 Billion
- Nigeria - $ 9.5 Billion
- Venezuela - $ 5.6 Billion
Exports:
The export destinations for Petroleum products of India are
Singapore, United Arab Emirates, Netherland, Malaysia, United States, Israel
and Nepal. Refined Petroleum is one amongst the major exports of India. India
is one among the top 10 countries which are exporter of refined
petroleum in the world. India exports refined petroleum to the Nepal, USA, UK,
UAE etc. India not only exports refined petrol but also Aviation Turbine Fluid,
diesel, naphtha, lubricant oil, fuel oil, bitumen, vacuum gas oil etc. The
exports chart shows the total export of crude and petroleum products in Million
Metric Tonnes. The chart clearly shows that the exports took off in the early
2000’s and slight fluctuation in the growth during 2015-16 and 2017-2018
periods.
The gap between
total import and total export of the crude and petroleum products are clearly
shown in the chart. India is encountering the trade deficit in the crude and
petroleum products. When comparing the growth of the imports and exports,
imports are increasing way quicker than the exports.
Consumption:
The total consumption of India in the year 2018-2019 was 213 MMT
which is 5.9% more than the year 2017-18. States like Haryana, Gujarat,
Maharashtra, Tamil Nadu, Karnataka are the highly consuming states. And the
North Eastern States like Assam, Arunachal Pradesh, Nagaland, Mizoram, Manipur,
Sikkim, Tripura and Meghalaya are the least consuming states.
Tax and Duties:
Customs Duty: It is levied when goods are transported across borders between
countries. It is the tax that governments impose on export and import of goods.
Custom duties are classified as follows
·
Basic Customs Duty (BCD)
·
Additional Customs Duty or
Special CVD
·
Protective Duty
·
Countervailing Duty (CVD)
·
Anti-dumping Duty
·
Education Cess on Custom Duty
Excise Duty: It is a form of tax imposed on goods for their production, licensing
and sale. An indirect tax paid by the producers of goods to the Government of
India i.e it applies only to the goods manufactured in our country.
Sales Tax / VAT: It is an indirect tax which is paid to a governing body for the sale
of goods and services. To meet financial requirements, the states need to levy
a separate tax on sales on the regulations of the ruling government which vary
from state to state. The VAT ( Value Added Tax ) levied by the states is a huge
source of income to state government.
The following are the various taxes and duties which are applicable
for crude oil and major petroleum products sourced from data published on
Petroleum Planning and Analysis Cell on 6th and 10th of
June 2020.
The below table shows the Central Excise and Customs tariff for
Crude and petroleum products such as Petrol, High Speed Diesel, Aviation
Turbine Fuel, Liquefied Natural Gas and Natural Gas.
|
Statement showing the Actual rates of State
taxes/ GST |
||||
|
State/UT |
Petrol |
Diesel |
SKO (PDS) |
Domestic LPG |
|
States |
Sales Tax/VAT |
GST |
||
|
Andaman & Nicobar Islands |
6% |
6% |
5.00% |
5.00% |
|
Andhra Pradesh |
31% VAT + Rs.2.76/litre VAT |
22.25% VAT + Rs.3.07/litre VAT |
||
|
Arunachal Pradesh |
20.00% |
12.50% |
||
|
Assam |
32.66% or Rs.22.63 per litre
whichever is higher as VAT |
23.66% or Rs.17.45 per litre
whichever is higher as VAT |
||
|
Bihar |
26% or Rs 16.65/Litre whichever is higher
(30% Surcharge on VAT as irrecoverable tax) |
19% or Rs 12.33/Litre whichever is
higher (30% Surcharge on VAT as irrecoverable tax) |
||
|
Chandigarh |
Rs.10/KL cess +22.45% or
Rs.12.58/Litre whichever is higher |
Rs.10/KL cess + 14.02% or Rs.7.63/Litre
whichever is higher |
||
|
Chhattisgarh |
25% VAT + Rs.2/litre VAT |
25% VAT + Rs.1/litre VAT |
||
|
Dadra and Nagar Haveli and Daman and
Diu |
20% VAT |
15% VAT |
||
|
Delhi |
30% VAT |
Rs.250/KL air ambience charges + 30%
VAT |
||
|
Goa |
25% VAT + 0.5% Green cess |
22% VAT + 0.5% Green cess |
||
|
Gujarat |
17% VAT+ 4% Cess on Town Rate &
VAT |
17% VAT + 4 % Cess on Town Rate &
VAT |
||
|
Haryana |
25% or Rs.15.20/litre whichever is
higher as VAT+5% additional tax on VAT |
16.40% VAT or Rs.9.20/litre whichever
is higher as VAT+5% additional tax on VAT |
||
|
Himachal Pradesh |
25% or Rs 15.50/Litre- whichever is
higher |
14% or Rs 9.00/Litre- whichever is
higher |
||
|
Jammu & Kashmir |
24% MST+ Rs.5/Litre employment cess,
Reduction of Rs.0.50/Litre |
16% MST+ Rs.1.50/Litre employment
cess |
||
|
Jharkhand |
22% on the sale price or Rs. 15.00
per litre , which ever is higher + Cess of Rs 1.00 per Ltr |
22% on the sale price or Rs. 8.37 per
litre , which ever is higher + Cess of Rs 1.00 per Ltr |
||
|
Karnataka |
35% sales tax |
24% sales tax |
||
|
Kerala |
30.08% sales tax+ Rs.1/litre
additional sales tax + 1% cess |
22.76% sales tax+ Rs.1/litre
additional sales tax + 1% cess |
||
|
Ladakh |
24% MST+ Rs.5/Litre employment cess,
Reduction of Rs.2.5/Litre |
16% MST+ Rs.1/Litre employment cess ,
Reduction of Rs.0.50/Litre |
||
|
Lakshadweep |
Nil |
Nil |
||
|
Madhya Pradesh |
33 % VAT + Rs.3.5/litre VAT+1%Cess |
23% VAT+ Rs.2/litre VAT+1% Cess |
||
|
Maharashtra – Mumbai, Thane &
Navi Mumbai |
26% VAT+ Rs.10.12/Litre additional
tax |
24% VAT+ Rs.3.00/Litre additional tax
|
||
|
Maharashtra (Rest of State) |
25% VAT+ Rs.10.12/Litre additional
tax |
21% VAT+ Rs.3.00/Litre additional tax
|
||
|
Manipur |
36.50% VAT |
22.50% VAT |
||
|
Meghalaya |
31% or Rs17.60/Litre- whichever is
higher (2% surcharge leviable only on advalorem tax) |
22.5% or Rs12.50/Litre- whichever is
higher (2% surcharge leviable only on advalorem tax) |
||
|
Mizoram |
25% VAT |
14.5% VAT |
||
|
Nagaland |
25.00% VAT +5% surcharge +
Rs.2.00/Litre as road maintenance cess +Rs.6.00/Litre as Covid cess |
14.50% VAT+ 5% surcharge +
Rs.2.00/Litre as road maintenance cess+Rs.5.00/Litre as Covid cess |
||
|
Odisha |
32% VAT |
28% VAT |
||
|
Puducherry |
28% VAT |
21.80% VAT |
||
|
Punjab |
Rs.2050/KL (cess)+ Rs.0.10 per Litre
(Urban Transport Fund) +23.30% VAT+10% additional tax on VAT |
Rs.1050/KL (cess) + Rs.0.10 per Litre
(Urban Transport Fund) + 15.15% VAT+10% additional tax on VAT |
||
|
Rajasthan |
38% VAT+Rs 1500/KL road development
cess |
28% VAT+ Rs.1750/KL road development
cess |
||
|
Sikkim |
25.25% VAT+ Rs.3000/KL cess |
14.75% VAT + Rs.2500/KL cess |
5.00% |
5.00% |
|
Tamil Nadu |
15% + Rs.13.02 per litre |
11% + Rs.9.62 per litre |
||
|
Telangana |
35.20% VAT |
27% VAT |
||
|
Tripura |
25% VAT+ 3% Tripura Road Development
Cess |
16.50% VAT+ 3% Tripura Road
Development Cess |
||
|
Uttar Pradesh |
26.80% or Rs 18.74/Litre whichever is
higher |
17.48% or Rs 10.41/Litre whichever is
higher |
||
|
Uttarakhand |
25% or Rs 19 Per Ltr whichever is
greater |
17.48% or Rs Rs 10.41 Per Ltr
whichever is greater |
||
|
West Bengal |
25% or Rs.13.12/litre whichever is
higher as sales tax+ Rs.1000/KL cess- Rs.17/KL exemption (20% Additional tax
on VAT as irrecoverable tax) |
17% or Rs.7.70/litre whichever is
higher as sales tax + Rs 1000/KL cess – Rs 290/KL sales tax rebate (20%
Additional tax on VAT as irrecoverable tax) |
||
Crude oil and
petroleum products incurs value addition in stages starting from Crude oil
bought overseas, ocean freight, refining, dealers , distributors and finally
goes to customers. Passing each stage some tax and duties are applicable the
which is shown in the below table
From the data it is evident that more than double the amount is
collected as tax and duties for the Petrol and Diesel in our country, where as
the VAT percentage differs from state to state which creates small difference
in the price between each states.
The below table shows the
revenue generated by the Central and State Governments on collection of excise
duty and sales tax for petroleum products. Due to the increase in the demand
and consumption level of petroleum products and also the increase in tax rates
the revenue collection increases each year. This also indirectly shows us the
dependency on the non-renewable source of energy and dependency on revenue
generated out of it.
Following are the reasons for the reasons for the fluctuation of
petrol and diesel prices,
· The Oil Manufacturing Companies
(OMC) are increasing prices each day to compensate the lost margin due to the
increase in exchange rates
· Due to sudden increase in the
price of the Crude i.e. Indian crude basket price on March was $33.3 per
barrel, on April $19.9 per barrel and now it is nearly $40.21 per barrel on
June
· Due to shadowed benefit of low price of crude by both Central and State governments i.e. the both governments have increased the excise duty and VAT to Rs. 10 per litre and Rs. 13 per litre respectively.
Way Forward:
Here are some of the things which can be done in short and long term to tackle the current situation and are as follows,
- Either Central or State Government should come forward and reduce the excise duty or VAT on petroleum products to control the price hike
- Due to COVID 19 the demand of crude oil fell to all time low which made crude price of Indian basket fell to nearly $19 per barrel and at that time total Indian storage filled to maximum
- In this revival time of economy Government should reduce the petrol and diesel price and allow the economic cycle to move forward
- Moving towards self-sustainability we should start using renewable energy sources for transport and other activities
- Responsibility not only lies in the hands of Government but also in the hands of the people
- Increase the production of more electric vehicles and providing subsidy for both company’s and buyers will drastically reduce the usage of petroleum vehicles and the demand will come down.
- Increasing the availability of more public transport will reduce the usage of private vehicles and consuming petroleum products will reduce.
What do you think?
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