Modi govt’s crude oil party finally over?

The Narendra Modi government’s crude oil party might be finally getting over.

Thanks to the 80 per cent slump in global crude prices between June 2014 and January 2016, the Centre had the leeway of raising excise duty on petroleum products. Thus collecting Rs.1.11 lakh crore in the first nine months of 2015- 16, against Rs. 99,000 crore in all of 2014- 15.

Also, oil marketing companies’ collective profits jumped 65 per cent to Rs. 13,090 crore in 2015- 16, while consumers gained through reduced retail prices of petrol and diesel.

All of that could soon become history. The price of the Indian basket of crude oil jumped as much as 78 per cent to cross $ 50 a barrel last week, from a multi- year low of $ 28 in January. After the OMCs’ latest round of revision in retail prices, taking effect on Wednesday, petrol is Rs.65.6 a litre. This level was earlier seen in October 2014, around the time global crude price benchmarks started crashing, and two months after the Modi government assumed charge.

On Tuesday, the OMCs had announced a steep Rs.2.58 a litre hike in petrol prices, to align domestic with global prices. Also, diesel prices have been raised by Rs.2.26 a litre to Rs.53.93, earlier seen in November 2014. The price of both automobile fuels have, therefore, returned nearer the level when the oil price crash set in, even as the Indian basket of crude is hovering at $ 47 a barrel, well below the October 2014 price of $ 86.

The Centre had raised the excise duty on petrol and diesel five times between November 2015 and January 2016. It argued the idea was to create a price cushion for consumers when crude started rising in the future; also that excise duty collection is important for creating rural infrastructure, including roads.

After the changes, the basic excise duty on petrol went up 34 per cent to ? 9.48 a litre and on diesel rose two and a half times to Rs. 11.33 a litre.

No wonder the petroleum sector’s contribution to the central exchequer in the form of oil levies ballooned to Rs.1.34 lakh crore in the first nine months of 2015- 16, from Rs.1.26 lakh crore in all of 2014- 15. The collection from excise duty alone jumped to Rs.1.11 lakh crore in the first nine months of FY16, from Rs.99,184 crore in all of 2014- 15.

For the OMCs, apart from elimination of underrecoveries, the sharp drop in crude prices brought a bonanza in the form of higher profits. Indian Oil Corporation ( IOC), the largest fuel retailer, reported anet profit of Rs. 10,399 crore, nearly double of the previous year’s Rs. 5,273 crore. Bharat Petroleums ( BPC’s) jumped 46 per cent to Rs.7,431 crore and Hindustan Petroleum ( HPC) reported a 41 per cent increase in profit to Rs.3,862 crore.

Experts say if the global crude price averages at the current $50 a barrel, OMCs’ gross underrecoveries ( GURs) are likely to be Rs. 39,000 crore in 2016- 17. The government is budgeting for a total petroleum subsidy of Rs. 26,900 crore for the year. “ If the crude price were to increase to $ 60 a barrel and $ 70 a barrel, GURs should increase to Rs. 51,000 crore and Rs. 63,000 crore, respectively,” said K Ravichandran, senior vice- president at ratings agency ICRA.

If the government retains the current subsidy sharing formula, whereby OMCs’ loss of up to Rs.12 a litre in kerosene and ? 18 a kg for cooking gas are borne by the government and the rest by upstream firms, the subsidy requirement would be Rs. 35,000 crore at an average crude price of $50 a barrel. According to ICRA, the Centre’s budgeted subsidy would be sufficient only up to a crude price of $45 a barrel.

Business Standard New Delhi, 02 June 2016

Household debt up, but India still lags emerging-market economies: RBI

Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Retail inflation cools to a six-year low of 2.82% in May on moderating food prices

New Delhi: Retail inflation in India cooled to its lowest level in over six years in May, helped by a sharp moderation in food prices, according to provisional government data released Thursday.Consumer Price Index (CPI)-based inflation eased to 2.82% year-on-year, down from 3.16% in April and 4.8% in May last year, data from the Ministry of Statistics and Programme Implementation (MoSPI) showed. This marks the fourth consecutive month of sub-4% inflation, the longest such streak in at least five years.The data comes just days after the Reserve Bank of India’s (RBI) Monetary Policy Committee cut the repo rate by 50 basis points to 5.5%, its third straight cut and a cumulative reduction of 100 basis points since the easing cycle began in February. The move signals a possible pivot from inflation control to supporting growth.Food inflation came in at just 0.99% in May, down from 1.78% in April and a sharp decline from 8.69% a year ago.A Mint poll of 15 economists had projected CPI ...

CA Online

Search This Blog