EASY TO ACT

We Will Make Things Happen

  • Increase font size
  • Default font size
  • Decrease font size
Home Articles/ Free Voice (list) PETRO PRICING: A BIG FARCE

PETRO PRICING: A BIG FARCE

E-mail Print PDF
Share

image

"Articles By Whistleblower & Activist Ravi Srivastava on oil industry and  issues which give us the hidden harsh reality and force us to think more than just normal . We are thankful to him for sharing his articles with us . Please Share Articles and be part of his fight against corruption."EasytoAct(ETA)

Petro pricing has been  a matter of debate for decades there is no transparency in Refining costs, Taxes, Duties, Margins, cess and other levies the fact is  Govt. never intended to make it open for public scrutiny,a figure of several lakh crores is flashed on TV screens with every price increase, where a few thousand crores are absorbed by Govt., upstream oil companies  and balance is passed on to market to squeeze the defenseless
consumer.Government budgets certain amount recoverable from Public towards Taxes&Duties and the subsidy is actually the “loss in Profit” by Govt., with every price increase the State Governments , octroi , cess for Municipalities, Dealer’s commission  every one takes his  pound of flesh in this official loot.

Murli Deora then Petroleum Minister, 3 years before in a Press conference proudly holding a Bisleri bottle in his  hand says ‘We are selling Kerosene even cheaper then this mineral water “what he did not explain, that whose money he was draining down the drain , it was our’s, taxpayers hard earned money doled out in the name of subsidy for below poverty line poor ,who seldom get it.

Petro pricing has been  a matter of debate for decades there is no transparency in Refining costs, Taxes, Duties, Margins, cess and other levies the fact is  Govt. never intended to make it open for public scrutiny, a figure of several lakh crores is flashed on TV screens with every price increase, where a few thousand crores are absorbed by Govt., upstream oil companies  and balance is passed on to market to squeeze the defenseless  consumer.Government budgets certain amount recoverable from Public towards Taxes&Duties and the subsidy is actually the “loss in Profit” by Govt., with every price increase the State Governments , octroi , cess for Municipalities, Dealer’s commission  every one takes his  pound of flesh in this official loot.

Genesis of fuel pricing shows that sometimes in the late eighties while fuel consumption was approx. 55Mt , ONGC, OIL were producing roughly half of country’s requirement , shockingly even after 25 years and sinking few Lakh crores of Rupees crude oil production of ONGC has not exceeded even by 1 Mt andremains  stagnant at 27 Mt , resulting into Nation’s50% dependence on imported crude  has reduced to 22% and 78% of the crude is imported today eating into precious  foreign exchange due to ever volatile Dollar .Nation faces a “crude shock” every passing fortnight  for the inefficiency on the part ONGC and policy bankruptcy of Shastri  Bhawan  Babus .ONGC is projected as a cash rich behemoth and Maharatna courtesy compensation to the company  on rising dollars.OIL is smaller culprit who could muster a moderate growth in their production due to smaller base.

As late as in 1998 Govt. used to compensate  OMC’s(Oil Marketing Companies) ,a 12% post tax return and  fuel prices were fixed by Govt.NDA rule dared to bring much touted deregulation, which  gave pricing leverage on paper to OMC’s and physically remained with Minister &Ministry ,Pricing of Lubricant , ATF(Aviation Turbine Fuel), Black oils were left to OMC’s ,who by and large cartelized and insulated themselves from competition, Private players preferred export instead of selling locally due to pricing disadvantage.They did open couple of thousand outlets which eventually closed down . Petrol, diesel, LPG and Kerosene were kept under MDPM(Market determined price mechanism) which remained same except the word “Market” replaced by ‘Minister’or ‘Ministry”.

In fact total  pricing freedom to OMC’s  in letter &spirit would have diluted the authority of Politicians/Babus of MOP&NG and therefore every increase /reduction in these 4 products have to be  blessed by Ministry, who will have privilege to announce it first on camera. OMC’s are used as a fiefdom or a  milch cow of Ministry for various services/facilities, favors like provision of Taxies for   personal use of babus and their  families , organizing trips to exotic locations, use of Guest houses at Major cities , appointing consultants and cut in contracts.In turn ministry protects corrupt Oil company officials from CVC,CBI&CAG .

OMC’s are plagued by 3 serious ailments, Inefficiency, corruption and Bad debts/ wasteful expenditures, OMC’s practically everyday make a hue &cry for under recoveries, fact is they are grossly inefficient ,take  the example of Project Management/Capital expenditure .HPCL  planned agreen field Refinery at Bhatinda after laying foundation stone 3 times twice by NDA Govt.and once by UPAI, finally the work commenced in 2008, even after missing 2 deadlines and 13 years Refinery is still not on stream , in fact HPCL now  has no money to by the Crude .The Project  cost escalated 4 times since original DFR(detailed feasibility Report).IOC raising a coastal Refinery at Paradeep for last 7 years with no where completion in sight .Refinery margins are another grey area with oil companies e.g HPCL having a GRM(Gross refining Margin) of  barely 30 cents in last quarter from their recently upgraded Vizag Refinery with thousands of crores of capex. OMC’s boast of high turnover and financials which is  courtesy increased fuel prices, volume sales have barely registered a growth of  average 3.5% y-o-y in last two 5 year plans. The worst part is that despite under recoveries in all 4 products which are consumed by masses and having complete  monopoly , OMC’s resort to competition with each other  and undercutting which is totally unfair, unethical and undesirable ,since they are compensated by Taxpayers money/National exchequer. OMC’s offer discounts to ICICI, HDFC, CITIBANK, RAILWAYS, DEFENCE   which has no logic or reasoning .In existing   scenario  where “more you sell more you loose” they should resort to “Demand management” and encourage fuel conservation.

Govt. cunningly deregulated the price of Petrol in july 2010 and gave a free hand to OMC’s to raise the prices on one pretext or the other, like crude prices gone up, Rupee weakened vis-a-vis USD or compensating loss on sales of Kerosene, while facts are contrary, In june 2008 when crude hit highest price of 147USD per barrel Petrol was selling for Rs. 51/ltr and now when crude is 110 USD per barrel Petrol is being sold Rs. 75 /ltr. OMC’s misused this leverage continuously for 13 times and finally succumbed to   Public/political outcry in the 1st weak of Nov. 2011 to 1stdownward  correction of  Rs.2,25/ltr. The logistic model of OMC’s is not cost effective and results into cris cross movement of Product .Few years before they tried to sell grocery to Textile at their Retail outlets which flopped miserably. Attempts like HPCL running Retail outlets in Mauritius, and IOC’s operation in Zimbabwe, SriLanka did not add to their bottom line either .The myth that Petrol is rich &effluent class fuel is unfounded , it is consumed by a vast population of Bikers/2 wheelers middle/lower middle class consumers , rich have already switched over to Diesel guzzling SUV’s.

Corruption is rampant in Oil PSU’s and the money is channeled from Sales officer to the Chairman for buying lucrative positions like Regional Manager, General Manger (zones) which are auctioned. There are quite a few avenues for generation of money Viz. Reconstitution of Retail outlets, De-leasing the land of Retail outlets, Adulteration Etc. According to survey more then 70% Retail outlets/Gas agencies have Minister, MP, MLA or corporaters either in ownership or as sleeping partner, bribes are paid for allotment of such outlets/agencies, which are  recovered by adulteration or selling Domestic cylinders in black to unauthorized consumers .NCEAR(National Council of Economic& applied Research) have established  in their study that 38% of PDS Kerosene is siphoned off for adulteration which is  Rs.15000 cr. industry Nation wide(e.g Malegaoncase). Price of Petrol Rs. 72/ltr and Diesel 45/ltr mixed with Kerosene of Rs.13/ltr is a lucrative trade and money  generated through this clandestine route is channeled up to Minister/Ministry .Govt. made no sincere attempt to curb adulteration till date except blue dying Kerosene in late Eighties  and a recently launched Marker , which proved to be  another fraud in CBI enquiry where Marker was purchased for Rs. 13000/ltr from a blacklisted British company Named BIOCODE .Marker was  abruptly abandoned in 2008 after the CBI  complaint and draining of  Rs. 200 cr of Public money and could not be restarted even after 3 years, despite several announcements by Ministers .

Land de-leasing is another oily business HPCL/BPCL inherited large No. of  Retail outlets of foreign oil companies like ESSO/CALTEX/BURMA SHELL having land prices fairly low  at the time of acquisition however now prices have appreciated multi fold and de leasing the Retail outlet land fetches crores of rupees for owners, ever greedy oil company officials, Politicians fix the deal and company executes it quoting  as a “VIP Reference”. Appointment of consultants and Advisors is another source of corruption, within couple months of officer attaining superannuation , he is appointed as Advisor/consultant at hefty compensation with a cut for Top company officials .HPCL alone has at least 20 such retired officers back on their rolls .Appointing foreign consultants like, Gallup, Thomson Associates, Mercer, Arthur D’little, Accenture  in the name of  improving productivity, Performance evaluation and boosting employee morale have failed in their objective and proved to be employment avenues for the wards of  working &retired company & Ministry officials.

Bad debts and infructuous expenditure are another drain on OMCs profits ,IOC has on date Rs1800 cr in principal and 400 cr in interest outstanding fro NACIL, HPCL has Rs. 703 cr.due from beleaguered Kingfisher they claim to have a Bank Guarantee for Rs.300 cr but moot question  is whether Bank will honor a Bank Guarantee to a 3rd party or settle their own dues first.IOC has Rs50 cr due from GSRTC for last 14 years. HPCL has sunk approx. 17 cr in a  wound up airline Modiluft  and  a few crores in recent defunct  Paramount Airways. The worst part is the chairmen of these companies defend   and justify their decisions stating these are   calculated risks. There is a popular Joke of 10 oil company officers launching a Oil conservation week each traveling alone in his car, numerous example of wasteful expenditure by OMC’s, recently BPCL spent Rs. 40 Lakhs of taxpayers money for fond farewell of one of their Director and HPCL spending Rs. 19 cr. from their Delhicoordination office on Shastri Bhawan Babus and Parliamentarians  for gifting them Novelties , Mementos

The chairmen of oil companies are   treated like dirt by Shastri Bhawan  Babus , recently IOC/HPCL CMD’s made some statement on increasing Petrol price, they do not realize how soon they will have to eat their words. The solution lies in making Petro pricing transparent and the farce of “Import parity” should be abolished, state taxes rationalized with GST , Kerosene should be market priced and any subsidy can be paid in cash/Bank Account through smart card/Aadhar  cards. Black of   Domestic cylinders being   sold as Non domestic must be stopped forth with , use of Domestic cylinders  be limited for households. A rational price mechanism for Petrol& Diesel would provide a much awaited relief to a common man.

.Deora has been shown the door from Petroleum Ministry and Cabinet, all his cronies have been shunted to non descript assignments. Ministry ,instead of working for Ambanies, Ruias,  for which CAG has already submitted a scathing report  and action will be taken in due course of time,  should concentrate on enhancing production of crude oil which is a long term solution ,OMC s should be pulled up to tighten their belts instead of  finding excuses.

Ravi Srivastava

 

"To Know his  battle against false Please Follow Tale of Two Whistleblower of HPCL"

 

Previous Articles : CORRUPTION WATCHDOG 3 C’s , COINCIDANCES, TOO MANYTHE MARK(ER) OF A SCAM-RS.200 cr. FRAUD BY MOP&NG ,   PUBLIC FUNDING OF A PRIVATE AIRLINE

 

About Author

Ravi Srivastava , Indian whistelblower

Whistleblower , Activist & Indian Against Corruption active volunteer .

I R.P.SRIVASTAVA, 56 year old ,male Graduated in Science and Chemical Technology in the year 1975, after an stint of 1 year at Eicher Tractors and 6 years in Kansai Nerolac(erstwhile Goodlass Nerolac), I joined HPCL in 1982 as an Operations Officer in Grade ‘A’.

"I am a crusader against corruption , corruption which destroyed my life exposed Rs. 200 cr. corruption in Petroleum industry Marker system invited the wrath of Murli Deora his sychphant beaurocrats , chairman of the company who promptly dismissed me from service to appease their boss"

Please Read  " Tale of Two Whistleblower of HPCL to know more.....

R. P. Srivastava
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
304, AUM SAI  Sector-7
Kharghar, Navi Mumbai  410210
Mob-  09820183924 L/L 02227744012
India Against corruption Activist and Volunteer from Navi Mumbai
My Blog http://raviprakash4354.blogspot.com

Contact Me if you want to join me in the fight .Because people support can make huge difference .

Read More Click On  Image


blog comments powered by Disqus
Last Updated on Wednesday, 30 November 2011 18:17  

OPEN REQUEST

Banner
Banner
Banner
Banner
Banner

Share EasytoAct

Delicious