Saturday, February 06, 2016
Record production in the United States (US), weakened demand from the Eurozone and emerging economies like China and Brazil, and Iran’s entry into the international market have effectively slashed the price of crude oil for India, from $106 per barrel in July 2014 to $26 in January 2016—a 75% drop over 15 months.
The answer: As global crude prices reach a 11-year low, the Centre and state governments steadily increase excise duties and value-added tax, shoring up their revenues and keeping fuel prices high for retail consumers.
Although India imports more than 80% of its fuel requirement, which means declining global prices should, theoretically, have seen sharp declines in retail petrol and diesel prices, Indian consumers of petrol and diesel now pay about double the global rate.
Retail prices of petrol and diesel prices in three states—Assam, Uttar Pradesh and Gujarat—show a variation of less than 10% during the current financial year, 2015-16, according to an IndiaSpend analysis.
For instance, the petrol price in UP rose Rs 2 per litre, when global oil price halved over the same period.
Indian prices stay high because oil marketing companies (OMCs), such as Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd and Reliance Industries Ltd., add their margins, the central government adds excise, state governments add their own (value-added) taxes, and the dealers (petrol pumps) get their commission.
The total of these is the retail price of the fuel you pay.
The excise duty on petrol and diesel has been hiked five times over the last three months, increasing the excise duty on petrol by 34%. On diesel, excise duty has increased by 140%.
The price at which OMCs sell petrol to dealers (petrol pumps) has been halved in two years. Over the same period, retail petrol prices have come down only by 15%.
The value-added taxes imposed by states have more or less remained the same, but excise duties—both basic and additional—imposed by the Centre have doubled between 2014 and 2016.
The addition of central taxes on diesel is higher than those on petrol. Central taxes per litre of diesel rose to four times its value in April 2014—from Rs 4.52 per litre to Rs 17.33 per litre in February 2016.
Retail consumers pay more tax on petrol and diesel than its actual price.
Of the price you pay for a litre of petrol, 57% goes to the government as tax. Of the Rs 44 per litre of diesel, 55% is tax.
If the excise duties on diesel had not been increased these two years, diesel would have cost Rs 32 per litre today.
The direct effect of oil prices on cost of transportation of goods and thus consumer inflation has been demonstrated by research from Integrated Research and Action for Development (an autonomous research institute), as journalist and economist Swaminathan Anklesaria Aiyar wrote in this blog.
Research on inflation in Turkey and Sri Lanka has underlined the effect of fuel prices on inflation.
Lower fuel prices can keep inflation in check, according to this report in Business Standard.
The author is Abhishek Waghmare, Indiaspend.org.
Plant load factors (PLFs) of power companies are unlikely improve in FY17 from the 61.7 per cent in 9MFY16, despite improving fuel supply since demand growth for electricity is expected to stay muted says India Ratings & Research (Ind-Ra). All India thermal plant PLFs have been consistently declining and have fallen 21.5 per cent since the peak of 78.6 per cent in FY08. Ind-Ra expects electricity demand to grow by 4-5 per cent and power generation growth of 5-6 per cent in FY17, with deficits remaining low at 3-4 per cent. India has added 80GW of coal based generation capacity over FY11-FY15, which gives room for higher generation given the improvement in domestic coal supply and low international coal prices. Industrial demand however which constitutes 40 per cent of the demand has witnessed a muted growth. Moreover, the current focus on use of efficient devices (LEDs and agricultural pumps) is leading to lower demand. In the Corporate Outlook FY17 a recent report released on 1 February 2016 Ind-Ra Has maintained a stable-to-negative outlook on power sector for FY17. Ind-Ra has also maintained a Stable outlook on most of its rated power sector entities for FY17, as the agency expects its rated entities will continue to manage fuel and state power utilities risks due to a favourable tariff mechanism, their comfortable liquidity and support from the central and state governments. Lower PLFs have resulted in lower incentives for regulated generators as their incentives for the control period FY15-FY19 have been linked to PLF, compared to the earlier availability based incentive. Additionally, a low PLF would lead to lower than benchmark operating parameters for station heat rate and secondary fuel consumption thus lowering the overall plant efficiency. Financially weak discoms have preferred load shedding rather than supplying power to the consumers, as they are incurring losses on every unit of power supplied as reflected in the revenue gap of Rs 1.14/kwh in FY14.
State-controlled construction major, the Central Public Works Department (CPWD) will generate 42.50 MW of solar energy across the country besides replacing energy inefficient electrical fittings in 20 government buildings in Delhi by September, 2016 and in rest of the country later, according to an official statement. “These initiatives of CPWD are estimated to result in a total saving of Rs.115 cr per year,” the ministry of urban development said in a statement. Efforts of CPWD in this regard and the consequent gains in terms of saving in energy consumption were reviewed today by Madhusudhan Prasad, Secretary (Urban Development). CPWD earlier signed a memorandum of understanding with Solar Energy Corporation of India (SECI) for generation of solar power for installation of grid connected rooftop Solar Photo Voltaic panels in all government buildings maintained by CPWD across the country. Consequently, SECI awarded works to 14 bidders for undertaking works in 16 states. 10 MW of solar power will be generated by May,2016 in Phase-I covering Delhi (3 MW), Uttar Pradesh (2 MW), North-East and UTs(2 MW) and 1 MW each in Andhra Pradesh, Karnataka and Maharashtra, the ministry informed. As part of measures to promote efficient use of energy in all the Government buildings, CPWD has begun to replace energy inefficient fittings with LED bulbs and 5 star air conditioning systems approved by the Bureau of Energy Efficiency. This will be completed in 20 buildings in Delhi by September, 2016. These measures are estimated to result in a total saving of 11.41 crore units of power and Rs 103 cr in energy cost per year, said the ministry. In Delhi, a total of 16,613 LED lamps have so far been installed in 261 of 268 government bungalows and 408 of 546 flats of MPs. The remaining will be done so during the budget session of Parliament.
Country's handicraft exports grew 10 per cent to Rs 14,782 crore during the first nine months of this fiscal notwithstanding a slowdown globally, the Textile Ministry said today. In comparison, the handicraft shipments stood at Rs 13,460 crore during April-December 2014. "In dollar terms, the value of exports has increased by 3 per cent, from USD 2,215 million during April-December 2014 to USD 2,282 million during April-December 2015," an official statement said. The data showed the size of the artmetal wares grew 6 per cent to Rs 3,943 crore, followed by woodwares 10 per cent to Rs 2,564 crore, handprinted textiles & scarves 18 per cent to Rs 699 crore, imitation jewellery 14 per cent to Rs 1,599 crore and miscellaneous handicrafts 12 per cent to Rs 4,033 crore. Overall, during the April-December period of the current fiscal, exports in the segment dipped 18 per cent to USD 196.6 billion as compared to USD 239.9 billion in the same period of the previous fiscal, according to data released by the Commerce Ministry.
Pharma major Cadila Healthcare Ltd on Friday reported a growth of 38.2 per cent in its consolidated net profit after taxes (PAT) at Rs 389.6 crore for the third quarter ended December 31, 2015, on the back of robust sales in the US market. “The consolidated net profit of the drug firm stood at Rs 281.9 crore during the same period a year ago,” said Cadila Healthcare Ltd in a filing to the Bombay Stock Exchange on February 05, 2016. Further, its total income increased by 10.8 per cent at Rs 2,453.9 crore during Q3 2015-16, as compared to Rs 2,214.9 crore during the same period last year. During the quarter, the company’s business in the US posted sales of Rs 1072 crore registering a growth of 20 per cent. The company filed 20 ANDAs with the US Food and Drug Administration (USFDA) during the quarter, the company said in a statement. In the Indian formulations market, the company launched 12 new products, including line extensions, of which 1 product was the first to be launched in India, it added. Buoyed by earnings, shares of the company closed at Rs 326.80 apiece, up 4.74 per cent, from previous close on BSE
Jubilant FoodWorks’ Domino’s Pizza, India’s Pizza delivery expert and market leader in the chained pizza segment has inaugurated its 1000th restaurant at Unity One Mall, Janakpuri, New Delhi. With the 1000th restaurant, India joins the USA - home country of Domino's Pizza where the brand has been operating since 1960 - to become the only other country with over 1000 restaurants, the company said in a filing to the Bombay Stock exchange. Having crossed the milestone of 1000 restaurants, the company’s team is focused on further catalysing the expansion process to make Domino's Pizza the most loved brand in the country. “Jubilant FoodWorks team is focused on further catalysing the expansion process to make Domino’s Pizza the most loved brand in the country,” the Indian franchisee said. Commenting on the development, J. Patrick Doyle, President and CEO, Domino’s Pizza, said, “India is a key market for Domino’s Pizza and having reached the milestone of 1000 restaurants is a remarkable achievement by the Domino’s team in India.” Meanwhile, shares of the company closed trading at Rs 1171.80 apiece, down 0.77 per cent from the previous close on BSE.
Commercial vehicles maker Eicher Motors today reported 76.1 per cent increase in its consolidated net profit at Rs 270.8 crore for the quarter ended December 31, 2015, riding on robust sales. The company had posted a net profit of Rs 153.77 crore in the year-ago period, Eicher Motors said in a filing to the Bombay Stock Exchange. During the quarter under review, total income of the company increased 45 per cent to Rs 3347.32 crore from Rs 2308.86 crore in the corresponding quarter last year. The company, which has a joint venture with Sweden's Volvo, said total domestic sales of Eicher Trucks and Buses (5 Tonne and above) stood at 10,480 units in the period under review as against 7,740 units in the year-ago quarter, a growth of 35.4 per cent. On the other hand, sales of Volvo Trucks were at 353 units as against 264 units in the same quarter previous year, up 33.71 per cent. Total sales of the JV - VE Commercial Vehicles (VECV) - were at 12,687 units in December quarter as against 9,492 units in the same period of the previous fiscal, up 33.65 per cent. Commenting on the performance, Eicher Motors Managing Director & CEO Siddhartha Lal said, "This has been a stellar quarter for VECV, the best ever over the last couple of years. VECV has not just registered growth across its product segments, it has also outpaced the industry thereby gaining market share." In the motorcycle segment, the company's arm Royal Enfield posted sales of 1,25,690 units as against 82,215 units in the year-ago period, up 52.87 per cent. He said the company had lost production of 11,200 motorcycles due to disruption at its manufacturing facilities because of the flood. The brand continues to have a robust demand for its products and has a very strong order book, he added. The company said in order to align with government requirements, its board of directors has extended the current financial year up to a period of 15 months - January 1, 2015 to March 31, 2016. Subsequently, each financial year of the company shall commence on April 1 and end on March 31 every year. Meanwhile, shares of the company closed trading at Rs 18128.45 apiece, up 7.01 per cent from the previous close on BSE.
Indian hydro power generation company NHPC Ltd on Friday said that unit-2 of the Chutak power station in Jammu & Kashmir has been restored on February 04, 2016. Since October 25, 2015, the company’s unit 2 of Chutak Power Station was under complete shutdown due to problem in water parts. In a filing to the Bombay Stock Exchange, the company informed, “Unit 2 of Chutak Power Station in Jammu & Kashmir which was under complete shutdown due to problem in water parts from October 25, 2015 has started generation on February 04, 2016.” Meanwhile, shares of the company closed at Rs 20.40 apiece, up 2.51 per cent, from previous close on BSE.