STATSGURU

The petrol price increase last week can only be the beginning, since the harder task of dealing with the pricing of diesel, kerosene and liquefied petroleum gas lies ahead. Underrecoveries, losses on each unit of fuel sold, are hitting oil marketing companies hard. As Table 1 shows, underrecoveries on diesel, kerosene, liquefied petroleum gas and petrol together have been, for a long period, a large proportion of the net sales of oil marketing companies. The absolute values, too,

as Table 2 shows, have soared, especially over UPA-IIs tenure. Prices have clearly not adjusted to the great increase in oil prices internationally over the past decade, shown in Table 3. Meanwhile petroleum subsidies have exploded since 2008-09 and now are a startlingly high proportion of the governments total subsidy bill, as visible in Table 4. Consider, for example, the subsidies on kerosene in the public distribution system, as shown in Table 5. They have systematically grown since 2009-10, although the Budgets share of the subsidies seems to have stayed constant per litre. A similar conclusion can be drawn from Table 6, which outlines the growth in subsidies of

domestic LPG cylinders. Of course, the oil marketing companies under-recoveries are eventually borne by the government as well, together with upstream companies like ONGC and GAIL. Diesel is perhaps the most problematic of the petroleum products in terms of its pricing. As Table 1 shows, it provides the largest component of under-recoveries. Also, as Table 7 shows, increases in petrol prices have not been matched by increases in diesel prices, creating significant distortions in the market. The proportion by which diesel is cheaper than petrol has steadily grown, as Table 8 shows. At 42 per cent today, it means that pricing is severely lopsided, and unsustainable.

1: SOARING UNDER-RECOVERIES
Under-recoveries: total, and as a % of net sales of OMCs, including forecasts
% of netsales
25

6: ..AND ON GAS CYLINDERS

Subsidy on domestic LPG, per cylinder
GovernmentBudget Bypublic-sector oil companies Total under-recoveryin ~ crore
150,000

( ~per cylinder)

22.6 480.5 22.6

138,541
20

112,810
120,000

40,000

18.70

21.06 17.50 14.10

15

13.40 13.50 10.10 11.60

90,000

22.6
60,000

22.6 22.6 152.5 156.1

22.6 214.1

22.6 326.0 22.6 234.9 22.6 249.9 178.1

10

45.2 67.8 62.27 89.5 124.9

30,000

0
06-07 07-08 08-09 09-10 10-11 11-12 12-13(B) 13-14(F)

Source: Petroleum Planning & Analysis Cell

Data compiled by BS Research Bureau Source: Petroleum Planning & Analysis Cell Data compiled by BS Research Bureau

2. WHERE THE MONEYS GOING

Diesel PDS kerosene Domestic LPG Petrol*

( ~ crore)

4: PETROLEUM SUBSIDIES TAKE OVER THE BUDGET

Petroleum subsidy: total and as % of subsidybill
~ crore as % of total subsidies 22.94

7. COMPARING PETROL AND DIESEL

Petrol and diesel prices in Mumbai, past decade
Petrol Diesel 78.57

~per litre

Decomposing under-recoveries, from 2006 (including a forecast for 2013-14)

52,550

14,380 10,250

12.00
35,500

2,956

2,683

2,699

33.64 2,820 2,852 45.28 38,371 68,481 14,951 43,580

24,770 2,720
*Petrol pricing decontrolled in June 2010 Data compiled by BS Research Bureau

2,230
Source: Petroleum Planning & Analysis Cell

5,225

6,351

12,650

23.16
Source: Bloomberg

RE: Revised Estimates; BE: Budget Estimates; Source: Expenditure Budget Vol. I, 2012-2013 Databook for DCH; April 10, 2012; Data compiled by BS Research Bureau

3: INTERNATIONAL OIL PRICES ARE FIVE TIMES HIGHER

Asia-Pacific crude oil prices per barrel, since 2001 $/BBL

5: THE SUBSIDY ON KEROSENE

Subsidyon PDS kerosene per litre
GovernmentBudget Bypublic-sector oil companies

~per litre

8: THE EVER-INCREASING PETROL PREMIUM

Figures in %

Percentage bywhich diesel is cheaper than petrol in Mumbai, past decade

0.82 0.82 31.49 0.82 24.06 115.7 0.82 0.82 0.82 7.96 2.45 1.65 1.69 3.12 12.10 0.82 0.82 0.82 14.85 17.39 31.15 28.50

42.37

15.17 16.23

24.80

Source: Bloomberg

Data compiled by BS Research Bureau

Source: Bloomberg

Every Monday, Business Standards StatsGuru will guide you through the numbers you need to know to make sense of the headlines.