Government Explains Why Petrol, Diesel Are Becoming Costly Every Day
Petrol and diesel prices in India have been on a skyrocketing journey over the past few months, having crossed or inching closer to Rs 100-per-litre-mark across many cities including Mumbai and Delhi. After a brief period of relaxation, commuters saw a consistent increase in retail prices of petrol and diesel by oil marketing companies for the last five to six weeks. The fuel price hike drew sharp criticism from the Opposition that accused the government of ‘looting’ the public. Union Petroleum Minister Dharmendra Pradhan returned the remark saying that prices across Congress-run states were far higher than others. “I accept that current fuel prices are problematic for people but be it central/state govt, over Rs 350 billion have been spent on vaccines in a year… In such dire times, we’re saving money to spend on welfare schemes,” Union Petroleum Minister Dharmendra Pradhan explained. “Rahul Gandhi must answer why fuel prices are high in Congress-ruled states like Punjab, Rajasthan, and Maharashtra. If he is so concerned about the poor, he should instruct the Maharashtra CM to reduce taxes as prices are very high in Mumbai,” he added. Gandhi had earlier this week hit out at the Centre over the rising fuel prices saying that the “waves of tax collection epidemic are continuously coming”. His remarks came after petrol prices touched Rs 100/litre in Mumbai and neared the century mark in Delhi as well. “The process of unlocking has started in many states. While paying the bill at the petrol pump, you will see the rise in inflation by the Modi government. The waves of tax collection epidemic are continuously coming,” Rahul Gandhi had tweeted in Hindi. On Saturday, petrol price in Mumbai hit an all-time high of Rs 102.36 per litre, while diesel cost Rs 94.45/litre, highest among the metros. In Delhi, the petrol prices touched a whopping Rs 96.12 a litre, while diesel is being sold at Rs 86.98 per litre. With global crude prices also rising on a pick up demand and depleting inventories of worlds largest fuel guzzler — US, retail prices of fuel in India is expected to firm up further in coming days.
Kochi gears up to be a bunkering hub
Petronet LNG’s plans to start bunkering services — that is, supplying fuel to ocean-going ships — from its Kochi terminal will boost the Cochin Port Trust’s ambition of emerging as a bunkering hub. The liquefied natural gas importer’s move comes at a time when the port’s bunkering business is growing at a fast pace. The bunker sales of public sector oil marketing companies such as IOC, BPCL and HPCL through Cochin Port jumped 52 per cent in FY21 to 3,21,144 tonnes from 2,10,759 tonnes the previous year. The port is banking on its proximity to international shipping routes to transform itself into a bunkering hub. Shipping industry sources said Singapore emerged as a top bunkering destination by extending various services to vessels travelling on the East-West shipping route. The bunker demand at all major oil trading as well as bunkering hubs such as Singapore, Fujairah, Rotterdam and Antwerp are centralised at a single port. But the maritime cargo traffic in India is scattered at multiple ports along its 7,500-nautical-mile coastline. This has resulted in the bunkering demand getting scattered in smaller volumes at too many ports. Oil companies have to incur additional costs towards transportation and port dues for positioning bunker fuels from refineries to the various ports scattered along the coastline. The port is also facing multiple challenges in bunkering operations. Chief among them is the non-availability of South Coal Berth (SCB), which has been decommissioned for conversion into an ammonia import terminal for Fertilisers And Chemicals Travancore Limited. This, along with the Q4 berth, was used by barges for loading bunkers. With the decommissioning of SCB, only the Q4 berth is available which is also used by ships for bringing in POL (petroleum, oil and lubricants) cargo and chemicals. Due to the uncertain availability of requisite berths, bunker operators are cautious about taking orders as they are unsure about the availability of berths in advance. The SCB is likely to be re-commissioned by late 2022 and until then the bunker business in Kochi will only be provided to vessels calling at the berths of the port, officials said, adding that the port was trying to resolve issues faced by bunker operators. The bunkering demand at the 12 major ports in India is about 1.8 million tonnes which is less than one per cent of the annual global bunker consumption estimated at 300 million tonnes. Petronet LNG is working on a bunkering project to shore up its business to tap into a growing demand from the global shipping industry for the use of green fuels. The company is assessing the marketing requirement of the number of ships plying with LNG as fuel on the international shipping route. The company is even considering deploying bunker barges to offer alongside bunkering, considering the bigger size of many ocean-going vessels and its inability to berth inside the terminal.
G7: Why major economies are delaying a break with the fossil fuel industry
The climate crisis is certain to be a hot topic at the G7 summit in Cornwall. While the leaders of the world’s richest countries agree in theory on the need to reach net zero emissions by 2050 at the latest, they remain faithful to a fossil fuel industry reluctant to substantively change its business model. A recent report by the International Energy Agency, a typically conservative advisory body, argued for an immediate ban on new fossil fuel projects. But investments by oil, gas and coal companies into finding new sources continue, as does industry lobbying to undermine regulation. The environment ministers of the G7 countries committed to end funding for new overseas coal projects by the end of 2021. But 51 per cent of their COVID-19 economic recovery funds – a total of USD 189 billion– paid between January 2020 and March 2021 were earmarked as financial aid for the fossil fuel industry. Worse, USD 8 of every USD 10 dedicated to non-renewable energy was paid with no conditions on these companies to reduce their emissions. Why does it seem so hard for G7 leaders to match their words with action when it comes to the fossil fuel industry? Betting on the long-term business case Despite setbacks in volatile markets and oversupply risks, there is still a lot of money to be made from extracting, producing and selling hydrocarbons. Demand for coal has plateaued, but oil and gas demand is predicted to rise at least for the next 15 to 20 years, particularly in emerging economies such as China and India. This puts G7 leaders in an awkward position. On the one hand, governments need to reboot economic growth after the pandemic slowdown – a profitable energy sector nourished by rising demand abroad is welcome, even though hydrocarbon extraction can be especially polluting in developing countries. Governmental support for the industry in the form of subsidies or tax breaks artificially inflates the profitability of fossil fuels, in turn making renewables a less attractive investment. Put simply, it is less risky and more profitable to – at least for now – invest in oil and gas. Carbon lock-in The fossil fuel industry continues to shed public support, but it can rely on the fact that it’s embedded within a complex system of consumers, suppliers and contractors, politicians and the media. The cause-and-effect relations that define such an intricate system often produce unintended outcomes. This interdependency is referred to as carbon lock-in. Economies have evolved in such a way that they perpetuate an energy landscape dominated by fossil fuels and plagued by an inability to radically change. Not only does carbon lock-in result in inertia, it causes a tragedy of the commons-type problem. Big oil companies such as BP, Exxon Mobil and Shell are unlikely to make meaningful changes until the rest of the system acts in unison. National oil companies and smaller privately owned fossil fuel companies comprise the bulk of known fossil fuel reserves. But they often evade the spotlight and so can operate with more freedom. For a big oil company to make high-risk changes to its business model while others enjoy a free ride would be seen as a bad business decision. Lock-in, as the name suggests, is very difficult to break. That said, G7 members are powerful nodes within this complex network. Strong leadership – such as divestment from fossil fuels and strong support for renewables – would cause reverberations throughout the whole system. But strong commitments coupled with counter-intuitive policies only send a signal that meaningful changes aren’t coming. Identity crisis People working in the fossil fuel industry often stay in the sector for their entire career – starting off as students of engineering or geoscience in departments funded by the industry, working all over the world and then heading into management positions. The industry’s identity is predicated on certain values that have existed since the early days of hydrocarbon exploration, including, as one study found, a deep trust in the potential of science and technology to further humanity’s control over nature and to drive progress and economic development. The ideological commitments of leaders in the fossil fuel industry will take a firm challenge from governments to overcome. It’s clear from financial decisions in the lead up to the summit that G7 leaders aren’t quite up to that test yet. But the meeting in Cornwall is their opportunity to signal that that cosy relationship is finally coming to an end.
Energy majors bid for Qatar LNG project despite lower returns
Six top western energy firms are vying to partner in the vast expansion of Qatar’s liquefied natural gas output, industry sources said, helping the Gulf state cement its position as the leading LNG producer while several large projects around the world recently stalled. Exxon Mobil, Royal Dutch Shell, TotalEnergies and ConocoPhillips, which are part of Qatar’s existing LNG production were joined by new entrants Chevron and Italy’s Eni in submitting bids on May 24 for the expansion project, industry sources told Reuters. The bids show energy giants continue to have appetite for investing in competitive oil and gas projects despite growing government, investor and activist pressure on the sector to tackle greenhouse gas emissions. Unlike Qatar’s early LNG projects in the 1990s and 2000s when the country relied heavily on international oil companies’ technical expertise and deep pockets, the country’s national oil company Qatar Petroleum (QP) has gone ahead alone with the development of the nearly $30 billion North Field expansion project. It is, however, seeking to partner with the oil majors in order to share the financial risk of the development and help sell the additional volumes of LNG it will produce. “I don’t think QP need the IOCs expertise in the upstream or midstream construction of the project but they will be glad to see someone take some LNG volumes off their hands,” a senior source in one of the bidding companies said. Qatar plans to grow its LNG output by 40% to 110 million tonnes per annum (mtpa) by 2026, strengthening its position as the world leading exporter of the super-chilled fuel. An Eni spokesperson confirmed the company is participating in the bidding process. QP, Shell, Chevron, TotalEnergies, Conoco declined to comment. Exxon said it did not comment on market rumours, but added: “We look forward to continuing success in future projects with our partners Qatar Petroleum and the State of Qatar. ExxonMobil affiliates are working with Qatar Petroleum to identify international joint venture opportunities that further enhance the portfolio of both.” Leading energy companies see natural gas as a key fuel in the world’s efforts to cut carbon emissions and replace the more polluting coal, although the International Energy Agency said in a report last month that investments in new fossil fuel projects should stop immediately in order to meet U.N.-backed targets aimed at limiting global warming. Activists say that expansion in natural gas delays a transition to renewable energy that is needed to meet U.N.-backed targets to battle climate change. The European Union is in the midst of a debate about what role gas should take in the energy transition. The outlook for global LNG supplies tightened sharply in recent months after Total suspended its $20 billion LNG project in Mozambique due to a surge in violence. It followed a string of delays of LNG projects in North America as COVID-19 hobbled demand last year. Global LNG demand has increased every year since 2012 and hit record highs every year since 2015 mostly due to fast-rising demand in Asia. Analysts have said they expect global LNG demand will grow about 3-5% each year between 2021 and 2025. LOWER RETURNS The interest from companies in the Qatari expansion comes despite relatively low returns. QP offered international bidders returns of around 8% to 10% on their investment, down from around 15% to 20% returns Exxon, Total, Shell and Conoco have seen from the early LNG facilities, according to sources in three companies involved. Qatar project returns have never previously been disclosed. The six companies and QP declined to comment on the terms of the bids. “Clearly Qatar has become more competitive,” a source said. “But it remains very low risk from the resource perspective.” The results of the tender process are not expected to be announced before September, two of the sources said. In March, QP said it will take full ownership of Qatargas 1 LNG plant when its 25-year contract with international investors including Exxon and TotalEnergies expires next year, in a sign of its growing confidence. Qatar is also in talks to make Chinese firms partners in the project, sources told Reuters last month. QP last month hired international banks for a multi-billion dollar debut public bond sale by the end of June, two sources said, to help in part development the Northern Field project.
Petrol price: Pradhan says Rahul Gandhi should seek cut in high taxes in Cong-ruled states
With petrol and diesel prices climbing to record high, oil minister Dharmendra Pradhan on Sunday said Congress governments in Rajasthan and Maharashtra should cut high sales tax if the party was concerned about fuel price burden on common man. Petrol and diesel have risen to all-time high across the country after fuel rates rose by Rs 5.72 per litre to Rs 6.25 per litre in less than six weeks. This is due to a combination of rising international oil prices and record high central and state taxes. Talking to reporters on the sidelines of an event organised to inaugurate oxygen plant set up by Indraprastha Gas Ltd at Maharaja Agrasen Hospital, he said central and state governments need additional money from the taxes on petrol and diesel to meet expenses for fighting pandemic as well as on development work. “I accept that fuel prices are pinching consumers,” he said, adding the government is spending Rs 1 lakh crore on providing free food grains to poor this year alone besides spending money on vaccines and healthcare infrastructure. Asked about Congress leader Rahul Gandhi’s repeated attacks on the Modi government for skyrocketing fuel prices, Pradhan said, “Why is fuel expensive in Maharashtra, Rajasthan and Punjab (which are ruled by the party)?” “If Rahul Gandhi is concerned about the poor being hit by fuel prices, he should ask chief ministers of Congress-ruled states to cut taxes. He should ask (Maharashtra chief minister) Uddhav Thackeray to reduce taxes,” he said. Later nuancing his remarks, Pradhan said he has never done politics on taxes but if someone wants to make an issue out of high taxes they should first set their house in order. “I fully understand that the money collected from taxes on fuel goes into a lot of social welfare schemes and development work. I have never bickered over this. But if Rahul Gandhi wants to make an issue out of only one part of taxes, I will have to say that they (Congress) have to look at the taxes in their own states, which are the highest in the country,” he said. Fuel prices differ from state to state depending on the incidence of local taxes such as VAT and freight charges. And because of this, petrol retails at over Rs 100 per litre mark in seven states and union territories- Rajasthan, Madhya Pradesh, Maharashtra, Andhra Pradesh, Telangana, Karnataka and Ladakh. Of these states, the Congress is in power in Rajasthan and is a coalition partner with Shiv Sena and NCP in Maharashtra. The BJP rules Madhya Pradesh and Karnataka and Ladakh too is under central rule. Andhra Pradesh has YSR-Congress in power while TRS rules in Telangana. Rajasthan levies the highest value-added tax (VAT or sales tax) on petrol and diesel in the country, followed by Madhya Pradesh, Maharashtra, Andhra Pradesh, Telangana and Karnataka. International oil prices have crossed $72 per barrel in anticipation of demand recovery following the rollout of vaccination programme by various countries. Last year when rates collapsed to two-decade low, the union government instead of passing on the benefit to consumers raised excise duty to record high. The excise tax on petrol was Rs 9.48 per litre when the Modi government took office in 2014, and that on diesel was Rs 3.56 a litre. Excise duty on petrol now is Rs 32.90 per litre and makes up for 34 per cent of retail selling price. The duty of Rs 31.80 a litre makes up for 36.5 per cent of retail diesel rates. Sri Ganganagar district of Rajasthan near the India-Pakistan border was the first place in the country to see petrol hitting Rs 100 a litre mark in mid-February and on Saturday it also earned the distinction of diesel crossing that psychological mark. Petrol in the city is sold at Rs 107.22 a litre – the highest rate in the country, and diesel comes for Rs 100.05. Premium or additive laced petrol in the town sells for Rs 110.50 a litre and same grade diesel at Rs 103.72. In Delhi, petrol has hit an all-time high of Rs 96.12 a litre, while diesel is now priced at Rs 86.98 per litre. Mumbai on May 29 became the first metro in the country where petrol was being sold at over Rs 100 a litre. Petrol now costs Rs 102.30 a litre in the city and diesel comes for Rs 94.39. Petrol and diesel prices have been raised on 23 occasions since May 4, when state-owned oil firms ended an 18-day hiatus in rate revision they observed during assembly elections in states like West Bengal. In 23 increases, petrol price has risen by Rs 5.72 per litre and diesel by Rs 6.25 a litre.
Current fuel prices ‘problematic’ for people, govt saving money for welfare schemes: Dharmendra Pradhan
Amid uproar over the rise in fuel prices which has crossed Rs 100-mark in some states, Union Petroleum Minister Dharmendra Pradhan on Sunday admitted that the current fuel prices are “problematic” for people but asserted that the government is saving money for welfare schemes. When asked about Congress’ nationwide protest against the skyrocketing fuel prices, Pradhan asked why fuel prices are high in Congress-ruled states. “I accept that current fuel prices are problematic for people, but be it central or state government, over Rs 35,000 crores is being spent on COVID-19 vaccines in a year. In such dire times, we are saving money to spend on welfare schemes,” he said. “Rahul Gandhi must answer why fuel prices are high in Congress-ruled states like Punjab, Rajasthan, and Maharashtra. A lot of money is being invested for welfare schemes across the country,” Pradhan said. He added, “If he is so concerned about the poor, he should instruct Maharashtra CM to reduce taxes as prices. The price in Mumbai is so high because tax is the highest in Maharashtra.” Congress leaders and workers had held nationwide protests on Friday against the rising prices of fuel in the country. After several hikes, the price of petrol price crossed Rs 95 per litre mark, while it is selling above 101 per litre in Mumbai. Diesel price stood at Rs 86.22 per litre in Delhi while in Mumbai it is Rs 93.58 per litre. The price of diesel and petrol differ from state to state depending on the value-added tax.