Alternate day fuel price revision rolls on, pause after hike a day ago
Under the new found preference for revising fuel prices every alternate day, the Oil marketing companies (OMCs) kept the pump price of petrol and diesel unchanged on Wednesday. Accordingly, the price of petrol continues to remain at Tuesday level of Rs 92.85 a litre and diesel Rs 83.51 per litre in Delhi. Across the country as well the petrol and diesel prices remained static on Wednesday but its actual retail prices varied depending on the level of local levies in respective states. The OMCs are following the practice of changing petrol and fuel rates every alternate day rather than undertaking changes on a daily basis for past few days. Accordingly, the Wednesday’s price hold came after there was an increase in prices on Tuesday. There was no price increase on Monday as well. Also, on Sunday while petrol and diesel prices were raised by 24 and 27 paise per litre respectively, there was no price revision on Saturday. Similarly, while fuel prices were raised on Friday, it remained unchanged in the previous day. “It seems oil companies are giving a sense of relief to consumers as fuel prices are not being raised on a daily basis. But still prices are not actually falling but being raised on every alternate day too this month,” said a oil sector expert not willing to be named. He said that the practice of daily price revision, started after deregulation of petrol and diesel prices few years back. This has now been done away by OMCs for past several months giving clear indication that administrative price regime is still working for the sector. Under daily price revision, OMCs revised petrol and diesel prices every morning benchmarking retail fuel prices to a 15-day rolling average of global refined products’ prices and dollar exchange rate. However, in a market where fuel prices need to be increased successively, alternate day price revision seems to be the flavour. It is worth noting that with 10 price increase in May, the retail price of regular petrol has already reached over Rs 99 a litre in Mumbai. Petrol prices are already over Rs 100 per litre in several cities in Madhya Pradesh, Rajasthan and Maharashtra. Premium petrol has been hovering above that level for quite some time now. Petrol prices have increased by Rs 2.30 a litre in Delhi in May in the 10 increases so far. Similarly, diesel prices have risen by Rs 2.78 per litre in capital this month. IANS had written earlier that OMCs may begin increasing the retail price of petrol and diesel post state elections as they were incurring losses to the tune of Rs 2-3 per litre by holding the price line despite higher global crude and product prices. With global crude prices at around $69 a barrel mark, OMCs may have to revise fuel prices upwards again if there is any further firming up.
Indian Oil’s March-quarter profit beats estimates on inventory gains
Indian Oil Corp Ltd on Wednesday reported a fourth-quarter profit that beat analysts’ estimates by a huge margin as higher crude prices boosted the inventory value of the country’s biggest refiner. The state-owned company reported a net profit of 87.81 billion Indian rupees ($1.20 billion) for the quarter ended March 31, compared with a loss of 51.85 billion rupees a year ago. Analysts were expecting the refiner to log a profit of 55.06 billion rupees, according to Refinitiv IBES data. Inventory gains are booked when oil prices rise by the time a company processes oil into fuel. Brent crude prices jumped about 23% during the March quarter. Revenue rose 18% to 1.64 trillion rupees. IOC’s April-to-March 2021 average gross refining margin – the difference between the cost of crude oil processed and the selling price of refined products – jumped to $5.64 per barrel against $0.08 a barrel a year ago. The company, along with subsidiary Chennai Petroleum , controls about a third of India’s 5 million-barrels-per-day (bpd) refining capacity.
Indian refiners set to curb spot buying to make room for Iranian oil
Indian refiners, anticipating a lifting of US sanctions, plan to make space for the resumption of Iranian imports by reducing spot crude oil purchases in the second half of the year, company officials told Reuters. The world’s third largest oil consumer and importer halted imports from Tehran in 2019 after former US President Donald Trump withdrew from a 2015 accord and re-imposed sanctions on the OPEC producer over its disputed nuclear programme. US President Joe Biden’s administration and Iran have been involved in indirect talks to revive the pact for Tehran to curb its nuclear activities in exchange for a lifting of sanctions. Analysts expect Iran to ramp up crude exports to 1.5 million barrels per day in the fourth quarter when sanctions are lifted. India, used to be Iran’s second biggest oil client after China, buying as much as 480,000 bpd in the fiscal year beginning April 2018. Several Indian state refiners, whose refineries are suited to the crude, have committed to buy Iranian oil once sanctions are lifted. State-run Bharat Petroleum Corp, which plans to tap the spot market for 45% of its overall imports, will buy Iranian oil if sanctions are lifted, a company spokesman said. High sulphur distillate-rich Iranian crude suits BPCL’s Kochi refinery and costs $2-$2.5/barrel less than similar grades, he said, adding that Iran’s proximity means India also has lower freight costs. Hindustan Petroleum Corporation (HPCL) also said it would buy Iranian crude if the price is right and it is suitable. “HPCL will consider buying Iranian oil depending on techno economic suitability as and when sanctions are lifted and situations are conducive for commercial transactions,” chairman MK Surana said. Top refiner Indian Oil Corp is also expecting to reduce spot purchases and can easily process about 2 million tonnes (14.6 million barrels) of Iranian oil this fiscal year, said a company source, who declined to be named as he is not authorised to speak to media. The IOC plans to buy 56% of its imports through term contracts this fiscal year. Indian refiners have raised the share of spot purchases versus term contracts to gain from cheaper barrels available in a surplus market. After the halt in Iranian oil, Indian had diversified its imports and raised its share of US oil. An official at Mangalore Refinery and Petrochemicals Ltd said his company would also cut spot purchases and buy Iranian oil. The resumption of Iranian oil supplies will help India replace lower supplies from Iraq and Kuwait, also members of the Organization of the Petroleum Exporting Countries, which has lowered output to support oil prices. India’s relations with Opec’s biggest member Saudi Arabia came under strain after it said the producer group’s output curbs were damaging to consumers. Tensions eased this month after Saudi Arabia provided India with oxygen to help it deal with a surge in Covid-19.
Now, Mitsui arm challenges Rs 2,400 crore retro tax order from govt
The government is facing a fresh international challenge to the policy of retrospective tax amendments adopted by it. Now, Earlyguard, a British subsidiary of Japanese conglomerate Mitsui & Co, has commenced arbitration under the India-UK Bilateral Investment Treaty after income tax authorities raised a Rs 2,400-crore demand related to a transaction that took place in 2007. While Earlyguard commenced arbitration proceeding in February, the Mitsui & Co disclosed the details, while releasing its financial results earlier this month. The Japanese giant said the tax department has demanded capital gains on the sale of shares of Finsider International Co — a UK company that owned a 51% stake in iron ore miner Sesa Goa — by Earlyguard. “Although Earlyguard treated the capital gain properly according to the tax laws at that time, the payment notice has been issued,” Mitsui & Co said. In earlier filings too, it had disclosed that a tax notice had been received in January 2020. Neither the tax department, nor Mitsui responded to requests for a comment. Like several other entities, proceedings against the Mitsui subsidiary started years after the government decided to retrospectively amend the Income Tax Act to levy capital gains tax on transactions that took place outside India but involved assets located in the country. The amendment was introduced by the then FM Pranab Mukherjee in 2012 after the government discovered that it could not realise any tax on the sale of Hutch Whampoa’s 67% stake in an Indian telecom firm to Vodafone in what was then the largest deal in the country. Since there was no way to catch Hutch, tax officials came up with a demand on Vodafone, accusing it of not deducting tax while making the final payment. Vodafone challenged the notice but lost the case in the High Court, while its stand was accepted by the Supreme Court. Mukherjee and his team then came up with the retrospective amendment, which was cited as part of the tax terrorism that even BJP complained about. While the Narendra Modi government promised not to use retrospective tax tools, it has done nothing to either stop the earlier proceedings, leave alone reversing it. In fact, officials in the finance ministry have been justifying the move and have challenged two adverse international awards against the amendment. First Vodafone and then Cairn Energy Plc have won arbitration cases in international tribunals, for violation of bilateral investment treaties. Both the cases have been challenged by the government, which has argued that taxation is the sovereign right of Parliament and is not dictated by commitments under investment agreements. In several cases, officials have sought to justify the stand on the grounds that tax was not paid in any jurisdiction.