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Who subsidizes petroleum products?

Who subsidizes petroleum products?. Government Or People?. Government claims it subsidizes petrol and diesel. Every few months Central government raises price of petrol and diesel Reason: - Oil companies are making losses.

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Who subsidizes petroleum products?

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  1. Who subsidizes petroleum products? Government Or People?

  2. Government claims it subsidizes petrol and diesel • Every few months Central government raises price of petrol and diesel • Reason: - Oil companies are making losses. - Government cannot afford to give more subsidy to oil companies So prices must be raised.

  3. Half the price of petrol is taxes and duties • More than half the price of petrol is made up of taxes and duties collected by central and state government • In Delhi: Petrol price, before the increase of Rs 3.50 in Jun 2010 : Rs 47.93 per litre Central & state Taxes: Rs 24.60 per litre

  4. One third of price of diesel is taxes and duties • More than one third of diesel is made up of taxes and duties collected by central and state governments • In Delhi: Price of diesel, before the increase of Rs 2 in Jun 2010 : Rs 38.10 per litre Central & state taxes: Rs 13.27 per litre

  5. Taxes collected from people on petroleum products in 2008-09 • By Central Government: Rs 68,286 crore • By state governments: Rs 93,512 crore • Total taxes paid by people to central and state governments Rs 161,798 crore

  6. Taxes collected from people on petroleum products are steadily rising

  7. Higher the price the more tax paid • Both central and state government like higher price of petroleum products. • Taxes and duties are a percentage of the price. • Central excise duty on petrol: 2000-01 Rs 5.32 2010 Rs14.78 So, increase of nearly Rs 10 per litre in petrol price is due to higher duty collected by central government.

  8. State governments collect more tax • State governments collect even more tax from petrol and diesel irrespective of whether ruled by UPA or NDA or Left parties. • Same parties make a show of protest when central government increases duties but keep quiet about what their state governments are doing. • Both central and state governments pursue anti-people taxation

  9. Tax rate of State Governments, % of price

  10. People pay for increased profit of oil companies • The total subsidy to oil companies by central government in 2008-09, the worst year when crude oil price crossed $ 140/barrel: Rs 71,292 crore • Total taxes and duties paid by people in 2008-09: Rs 161,798 crore • During Apr-Dec 2009, subsidy to oil companies reduced to Rs 14,000 crore but price and tax paid by people further increased!!

  11. New price policy • Central government announced in June 2010 there will be no control from now on price of petrol and diesel • Oil companies will revise price every month • So cost of transport of goods and people will keep rising steadily • Oil companies will make more profit; • Central and state governments will collect more taxes from people.

  12. Latest burden on people • Petrol price increased by Rs. 5 per litre on 15 May 2011. • On 24 June, diesel price increased by Rs 3 per litre, kerosene by Rs. 2 per litre and LPG cylinder by Rs. 50 • The burden of June increases on people will be Rs 21,000 crore.

  13. Petrol price revised frequently after decontrol • 26 Jun 2010 • 16 Dec 2010 • 16 Jan 2011 • 15 May 2011 • Total price increase of Rs 12 (nearly 25%) during last one year

  14. Duties cut but for whom? • While announcing price increases on 24 June 2011, government lowered some of the taxes and duties: • Removed custom duty of 5% on crude oil • Reduced import duty on petrol and diesel from 7.5% to 2.5% • Reduced excise duty on diesel by Rs. 2.6 to Rs. 2 per litre

  15. Benefit of lower taxes goes to petroleum companies and not to people • Total reduction in taxes and duties will be Rs. 49,000 crore in 2011-12. • Petroleum companies will earn this much more profit besides the additional profit due to rise in price of diesel and LPG.

  16. High crude price is a bogey • Assume crude price as high as $107/barrel • One barrel equals 158.76 litre. • At 1$ = Rs. 45, crude price works out Rs 30 per litre only • Cost of refining is only around 50 paise/litre

  17. Are people subsidized? • There is no subsidy to people on petrol, diesel, LPG or kerosene. • People are paying more and more every year so that - oil companies can make more profit - government can give more tax rebates to the rich

  18. Thank you

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