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Pricing

Pricing. Evolution of Pricing. Administered Pricing Mechanism (APM) Started in 1975 basis OPC recommendations Modified in 1984 basis OCRC recommendations Phased dismantling of APM Commenced in 1998 APM for refineries and indl. products dismantled in 1998

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Pricing

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  1. Pricing

  2. Evolution of Pricing • Administered Pricing Mechanism (APM) • Started in 1975 basis OPC recommendations • Modified in 1984 basis OCRC recommendations • Phased dismantling of APM • Commenced in 1998 • APM for refineries and indl. products dismantled in 1998 • Marketing of ATF deregulated in April 2001 • Full dismantling effective April 2002

  3. Pricing under APM • Consumer prices fixed by the Govt. • Assured reimbursement of costs to OMCs • Assured 12% post tax return returns on investment

  4. Phased Deregulation of APM • Phased deregulation of Marketing activities • Lubes - November 1993 • Bitumen – August 1997 • FO, LSHS, Naphtha, etc. - April 1998 • ATF - April 2001 • MS, HSD, SKO & LPG – April 2002

  5. Pricing Post APM Dismantling • Refinery transfer prices (RTP) of products on Import Parity Principle (IPP) • RTPs of MS & HSD on Trade Parity effective June 2006 • Limited subsidies on PDS SKO and Dom. LPG from Govt. budget • Revision in selling prices of MS, HSD, PDS SKO & Dom. LPG basis Govt. approval • Selling prices of other products market determined

  6. Pricing Import Parity Price (IPP) : • IPP at smaller ports linked to nearest Port Refineries based on coastal freight • IPP for Inland refineries based on Inland freight differential from nearest primary port • Inland freight differential is 75% of the railway freight between nearest primary port and inland refinery

  7. Import Parity Pricing (IPP) • Refinery Transfer Prices (RTP) based on IPP for : Refinery Ports Non Refinery Ports Jamnagar Mumbai Kandla Mangalore Paradeep Kochi Chennai Visakh Haldia

  8. Refinery Transfer Prices (RTP) • RTPs of ATF, SKO & LPG fixed monthly • RTPs of other major products fixed on fortnightly basis • RTP based on IPP is worked out considering • Product FOB • Ocean Freight – Middle East to port location • Customs Duty • Insurance, Ocean Loss, Port Wharfage Etc.

  9. Pricing Prices for Sale to Customers : • Pricing of MS, HSD, SKO & LPG being continued on APM structure with: • Uniform ex-storage selling price for all refineries including inland refineries • Depot prices worked based on • NRF from nearest refinery • Shrinkage allowances and local levies • State surcharge • Excise duty

  10. Pricing Retail Selling Price (RSP): • Retail selling prices at retail outlets are worked out basis: • Price at nearest depot • Road Delivery charges • Sales Tax • Dealer commission • Local levies & • Shrinkage allowance for hilly areas

  11. Product Exchange at Depots • Product exchange prices for Inland depots linked to Refinery/ non refinery ports based on the cheapest mode of transport available e.g.: • Pipeline freight for P/L TOPs equal to • 75% of rail freight for MS & HSD • 90% of rail freight for SKO • Actual Rail/ Road freight for other inland locations • Terminalling charges- basically charges for storage & distribution facilities. Rates varies with mode of delivery & product

  12. Free Trade Products • Free Trade Products - Competitive Pricing -Price changes every fortnight basis International Crude prices -Price charged to Customer is called PRA since sold Ex MI. -Eg: FO,LDO,Industrial SKO, ATF, LVFO, Naptha, Bitumen • Pricing Structure of Free Trade Product Basic Price ex Refinery Point (BCSP) xxx NRF xxx Siding Shunting xxx State Surcharge xxx Assessable Value xxx Excise Duty xxx Additional Excise Duty xxx Edu Cess xxx PRA xxxx

  13. Controlled Products • -RSP fixed by Governement • -Prices change periodically at the Government’s discretion • -Price charged to the customer is called TSRA/CBR since sold as delivered. • -Eg: MS, HSD, Domestic SKO, Domestic LPG • Pricing Structure of Controlled Products MS/HSD Basic Price ex Refinery Point xxx PRA xxxxx NRF xxx Delivery Charges xxx Siding Shunting xxx Shrinkage allowance xxx RPO FACTOR xxx TSRA xxxx PAF xxx Entry Tax xxx Additive cost xxx Sales Tax/VAT xxx Shrinkage Allowance xxx Additional Sales Tax xxx State Surcharge xxx Surcharge on ST xxx Assessable Value xxxxxDealer Commission xxx Excise Duty xxx VAT on Dealer Commission xxx Additional Excise Duty xxx Final RSP xxxxx Edu Cess xxx FDZ Charges xxx PRA xxxxx

  14. LPG CATAGORIES FOR PRICING PURPOSE • LPG Bulk - Non Domestic • LPG Domestic Pkd - 14.2 , 5 , 47.5 • LPG ND Pkd – 19, 35, 47.5 Stages of Costing / Pricing Port Level Pricing- ie Fixing IPP Plant Level Pricing Market Level Pricing

  15. LPG COSTING- Import Parity Price • Ten coastal locations as pricing points. Monthly IPP • IPP includes FOB, premium/ discount, freight, ocean loss, insurance, LC charges, port charges/ wharfage etc. • For Inland location, IPP of nearest port plus 75% rail frt. • Price as per IPP basis is used for settlement with OMCs and Fractionators. It is called RTP. • Terminalling Charges – not part of IPP/RTP and is settled separately.

  16. FOB Prices $/MT Butane Propane • Nov 08 490 490 • Dec 08 335 340 • Jan 09 380 380 • Feb 09 505 505 • March 09 450 470 • April-09 405 395 • May-09 400 380 • June-09 455 395 • July-09 540 500

  17. PLANT LEVEL COST • Monthly IPP for Ten pricing port. Each plant attached to port for costing purpose. • Marketing cost ,Marketing margin • Return on WC , stock loss • Addl import cost for ND • Actual transport cost from pricing port (rail/road/pipeline) to plant • Filling cost and Cyl. Compensation • Terminalling charges –port specific • Sub Total = Plantwise Cost Price

  18. MARKET LEVEL COST • Plant Price • State surcharge, PAF • Pkd TPT cost • Octroi, toll tax • CBR • DC , VAT • RSP

  19. ND BULK LPG • Price developed for ten port plus four Inland refineries • IPP includes Customs duty 5.15% • Marketing margin, cost, import cost, Terminalling charges ( Rs 5000/MT app) • Ex-storage price is advised. • State surcharge of receiving state • Excise Duty 8.24% (AV / TV) • Discount if any • Sales Tax as applicable

  20. LPG PRICING FOR ND PKD NON DOM. PKD LPG • Cost price concept • No subsidy for ND PKD • Pricing uniformity with OMCs maintained • Cost price for each plant is different.

  21. NON-DOMESTIC PKD LPG – Actual PBU • Import parity Price (with 5.15% CD,cess) • Marketing margin, cost, CVR , Filling cost, import cost, Terminalling charges • Freight Actual from port to plant - Rail/ Road/ P/L • State surcharge, Bulk Octroi- if any, • Plantwise cost Price • Excise Duty- 8.24% • Packed Frt ( Rs 15/18/21 per cyl) • CBR • Sales Tax , Dealer commission, Vat on DC • RSP

  22. Pricing / Loss on Domestic LPG • Though Govt. deregulated the prices of all petroleum products, including domestic LPG eff. April 1, 2002, the prices of domestic LPG was frozen at the levels • prevailing on 17-3-02. In June 04 and Nov 04 increase of Rs. 20/- each was approved. Eff 5.7.08, there was hike of Rs 50/- per cyl. Eff 29.1.09, there was reduction of Rs 25/-cyl • Thus though the cost is increasing , there is minor change in selling price

  23. DOMESTIC LPG – Actual PBU • Ex- storage point price - Rs 17996.50/MT • Bulk NRF ie. Frozen NRF as of 15.4.85 plus incre. 94-95, 97-99 • Price Adj. Factor (ED / ST) (state specific) • = Issue Price (Plant specific) • State surcharge (state specific) • Bulk / Packed Octroi - if any • Packed Frt ( Rs 10/12/14 per cyl) • CBR • Sales Tax , Dealer commission Rs 21.94cyl eff 1.7.09, Vat on DC • RSP

  24. DOMESTIC LPG – Subsidy/ loss claim • Plantwise Cost price – issue price = Gross Loss • Ie (IPP+Bulk Frt+TC+Margin+FC+Cyl comp) -(BCSP+NRF+PAF) • Partially compensated thru subsidy, balance thru loss sharing by ONGC/ GAIL and by Oil Bonds or by OMCs • No subsidy for cost beyond plant level, CST u/r, diff linkages.

  25. DOMESTIC LPG – U/R not covered by subsidy / Loss scheme • RTP paid to act. source vs. RTP/IPP of pricing port for the plant • Bulk TPT from actual source to plant vs. Bulk TPT from pricing port to plant. • Actual Pkd TPT cost for market vs. As per PBU. • CST U/R when pricing (APM) is on within state basis while supply is on interstate basis. • U/R on Actual imports which is 100% Butane at current CP rate whereas RTP based on previous month CP rate with 60:40 mix. • Toll Tax

  26. NON-DOMESTIC PKD LPG – Some issues • Inland Refineries (IOC) demanding 100% Rail frt for ND use instead of current 75% • Fractionators / Inland refineries demanding CST reimbursement on ND LPG which is not paid currently. • Imported LPG can not be used for ND purpose. • ED paid on AV for own souring and paid on TV from OMC procurement whereas in PBU it is on AV. • Other issues similarly as applicable for domestic LPG

  27. Domestic Packed LPG Basic Price xxx State Surcharge xxx NRF xxx Assessable Value xxxxx Excise Duty xxx PAP xxxxx Local Delivery Charges xxx CBRxxxxx Sales Tax/VAT xxx Additional Sales Tax xxx Dealer Commision xxx VAT on Dealer Commisionxxx Final RSP xxxx

  28. PRICE BUILDUP FOR DELHI MARKET FOR INTER STATE SUPPLY

  29. POL Pricing ♦MS/HSD Pricing is solely dependent on Town code irrespective of the source of supply if supplies are within state. Supplies are only on Delivered basis. ♦SKO/LDO/FO/Naphtha Pricing is on the supply location - Ex.MI. Supplies are Delivered & EXMI only. Discounts/Delivery charges are linked to supply points. State surcharge in case of Ex.MI will be that of the state of supply plant.

  30. THANK YOU

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