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PwC

India Energy Conference 2008. Product Pricing October 3, 2008. PwC. Transport Fuel Prices in India vis-à-vis Others. Countries price fuels for reasons like collection of revenue or restricting use for environmental control. Many countries price fuels more than India. Gasoline Price Nov 2006

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PwC

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  1. India Energy Conference 2008 Product Pricing October 3, 2008 PwC

  2. Transport Fuel Prices in India vis-à-vis Others Countries price fuels for reasons like collection of revenue or restricting use for environmental control. Many countries price fuels more than India. Gasoline Price Nov 2006 in US Cent per Litre Diesel Price Nov 2006 in US Cent per Litre Source : GTZ, International Fuel Prices 2007 Product Pricing & Subsidies

  3. Comparison of fuel prices across countries India passes on less price to consumers than in developed world. Worst, the oil companies recover much less out of that. Ex-tax Price & Taxes [Q1 2008] Gasoline Diesel Ex-tax price Tax component Product Pricing & Subsidies Source: IEA Statistics Energy Prices and Taxes: First Quarter 2008 Note :The term Gasoline as used here refers to the Regular Unleaded Gasoline.

  4. Comparison of fuel prices- India and China Petrol RSP has not increased with increase in crude prices due to low-degree of pass-through. China, however, has much better pass-through ratio. Source: IEA Statistics Energy Prices and Taxes: First Quarter 2008; PPAC-Oil Prices and Taxes, GoI(2008) Product Pricing & Subsidies The pass-through ratio is the ratio obtained by dividing the % change in RSP of gasoline during the period 2004-08 by the % change in crude oil price for the period 2004-08 Slide 4

  5. Comparison of fuel prices- India and China In case of Diesel as well, China has not hesitated from passing on the cost of crude oil to consumers. Source: IEA Statistics Energy Prices and Taxes: First Quarter 2008; PPAC-Oil Prices and Taxes, GoI(2008) Product Pricing & Subsidies The pass-through ratio is the ratio obtained by dividing the % change in RSP of diesel during the period 2004-08 by the % change in crude oil price for the period 2004-08 Slide 5

  6. CENTRAL GOVT STATE GOVT. OIL COMPANIES CONSUMERS Upstream NOC/ Nomination block Customs Duty Sales Tax Upstream NOC/ Nomination block PDS Kerosene Subsidised Private players Pre NELP blocks Excise Duty Direct taxes Private players Pre NELP blocks Private players (?) NELP blocks Other Petro-products Free market price GST (?) Pollution Cess (from Feb 2008) Private players (?) NELP blocks LPG Subsidised Burden sharing mechanism Recent BKC pricing committee report has proposed to enlarge the ambit of stakeholders to share the burden and insulate consumers. STAKEHOLDERS Petrol, Diesel Controlled price/Capped Refineries & Marketing Public sector Metro Cess Subsidy Oil Bonds Refineries & Marketing (Private sector) Product Pricing & Subsidies

  7. Burden sharing mechanism Assistance from Centre is approaching limits and States do need revenues. The imperative is to take tough decision to pass on to consumers. Product Pricing & Subsidies Source: Petroleum Planning and Analysis Cell (PPAC), GoI (2008)

  8. Conclusions For healthy growth of oil industry infrastructure and competitive market, GoI must enact milestones for moving to free market pricing in next 3 to 5 years. • Allow economic value of fuels to be seen in prices; • Bring fuels under classical VAT and in future under GST; • Subsidize BPL families through direct subsidy mechanism; • OMCs be relieved of financial burden; • Agree to market-determined fuel pricing; and • Legislate roadmap to market pricing through. Product Pricing & Subsidies

  9. Thank you © 2008 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).

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