Centre sitting on Rs 25 lakh cr fuel tax; inflation, petroleum price rise will dominate session: Kharge
Stating that the issue of inflation and the rise in fuel prices will dominate the Parliament session beginning July 19, senior Congress leader Mallikarjun Kharge on Monday alleged the Centre had collected Rs 25 lakh crore through fuel tax but it is neither using this fund for the welfare of people nor giving it to state governments. Addressing a press conference here, the Leader of Opposition in the Rajya Sabha said the Narendra Modi government had made the lives of ordinary people “miserable” in the last seven years. ”Prices of fuel, LPG, edible oil are at an all-time high. The Centre has collected Rs 25 lakh crore as tax on fuel but it is not being used for people’s welfare or being given to state governments,” Kharge alleged. He said the Modi government had raised prices of fuel “326 times including 38 times in the last two months”. “The Central tax on fuel during the UPA rule was Rs 9.48 (per litre) which is now Rs 32.90 (per litre). During the tenure of the UPA, the rate of crude oil was Rs 111 per barrel and the petrol price was Rs 71 (per litre). Contrary to this, when the rate of crude oil is 44 USD per barrel the price of petrol is Rs 107 per litre now,” he said. He said while the Union government has “collected Rs 25 lakh crore in the fuel tax” and the rate of LPG cylinder has reached Rs 834 the subsidy has also been withdrawn. “The prime minister had said direct benefit transfer (DBT) would ensure savings of Rs 15,000 crore, which means the government has saved almost Rs one lakh crore this way. But the Modi government is not using this money for the welfare of people and also not providing it to state governments,” Kharge said. He said Congress leader Rahul Gandhi had suggested that Rs 6,000 be transferred in bank accounts of the poor, but that idea was rubbished. “During the UPA rule, 27.1 per cent people were lifted above the below poverty line whereas 23 crore people were below the poverty line (BPL) as of last year. Due to the wrong policies of the Modi government, the income of 97 per cent of families had reduced,” Kharge said. He said 1.33 lakh people lost their jobs during the COVID-19 pandemic while the per capita income fell by Rs 10,000 and GDP dipped by 9 to10 per cent. Kharge said Maharashtra is yet to receive Rs 32,000 crore in GST refund from the Centre. The Congress is one of the ruling constituents in the Maha Vikas Aghadi government comprising the Shiv Sena and the NCP.
Oil prices slip as economic fears offset tightening crude supplies
Oil prices fell on Monday as concerns about slowing global growth outweighed the prospect of tightening supply after talks among key crude producers to raise output in the coming months stalled. Brent crude for September fell 45 cents, or 0.6 per cent, to $75.10 a barrel by 12:08 p.m. EDT (1605 GMT). U.S. West Texas Intermediate crude for August was at $74.07 a barrel, down 49 cents, or 0.7 per cent. Both benchmarks fell about 1 per cent last week but remain close to highs not seen since October 2018. The spread of coronavirus variants and unequal access to vaccines threaten the global economic recovery, finance chiefs of the G20 large economies said over the weekend. The remarks weighed on the oil demand outlook. “Traders are now refocusing on the spread of the COVID-19 pandemic and global concerns over the new variants’ expansion,” Rystad Energy analyst Louise Dickson said. The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, abandoned talks last week over an output deal, which included pumping more oil from August, after a dispute between Saudi Arabia and the United Arab Emirates about how to extend the pact. Although the failure to agree means less oil in the short term, analysts say the collapse of talks raises the longer term prospect of producers abandoning the deal and pumping at will. “The longer the standoff … the greater the possibility of some sustained price weakness,” said Jim Ritterbusch of Ritterbusch and Associates in Houston. “For now, we still anticipate some movement this week with an OPEC + plan to disregard 2022 production quotas while focusing on the coming six months in which the UAE demands for less production restraint may be accommodated.” Saudi Arabia and Oman called for continued cooperation between OPEC and allied producers. Meanwhile, oil stockpiles in the biggest crude producing nation continued to tighten, with U.S. inventories falling to the lowest since February 2020 in the week to July 2. Analysts polled by Reuters estimate U.S. crude in storage fell by about 4.3 million barrels in the week to July 9.
Centre seeks legal opinion to let BPCL sell subsidised LPG after stake sale
A two-decade-old LPG supply order restricting supply of domestically produced LPG to only state-owned oil companies has stymied plans to allow Bharat Petroleum Corporation Ltd (BPCL) to continue selling subsidised cooking gas (LPG) after its privatisation. A legal opinion has now been sought to ascertain if privatised BPCL will be eligible to receive liquefied petroleum gas (LPG) produced by companies such as ONGC and GAIL, two government officials with knowledge of the development said. Currently, BPCL has more than 84 million domestic LPG customers, including 21 million Ujjwala customers. The company does not produce enough LPG at its refineries to be able to cater to the requirement of all these. It, like other oil marketing companies, buys LPG from state-owned firms like Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd as well as private companies such as Reliance Industries Ltd. The Liquefied Petroleum Gas (Regulation of Supply and Distribution) Order, 2020, known as LPG Control Order of 2000, restricts sale of indigenously produced cooking gas only to state-owned oil marketing companies — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and BPCL. It restricts supply of LPG produced by firms such as ONGC and GAIL to private firms. Private LPG retailers, called parallel marketeers, have to use imported gas for supplying to customers. The 2000 Control Order was issued as the nation is short in LPG production. Once BPCL is privatised, the 2000 order will bar ONGC and GAIL from selling LPG to BPCL, the officials said. “Post divestment of the government’s stake in BPCL, it shall cease to be a government oil company in terms of clause 2(g) of LPG Control Order of 2000,” an official said. With no access to indigenously produced LPG, BPCL won’t be able to serve its customers and it would not be possible to shift the customers to IOC and HPCL as LPG cylinder equipment at customer end will need to be changed. Also, IOC and HPCL may not have the required infrastructure to cater to such a large customer base, the officials said. As a way out, it is being considered to continue to treat BPCL as a government company for the purpose of the 2000 Control Order for three years, the officials said adding that a legal opinion has been sought to ascertain if such a move is tenable under the law. The other alternative is to amend the LPG Control Order itself to allow private firms to access indigenously produced LPG. This would open up LPG retailing to other private firms. Officials said law ministry opinion has been sought to determine if the term government oil company in the LPG Control Order necessary requires the company to be a government company and if BPCL post privatisation can be notified as a government oil company. To interpret the term ‘government company’, the opinion of the Ministry of Corporate Affairs (MCA) as well as the Ministry of Consumer Affairs (MoCA) has been sought, they said. MCA because it is the administrative ministry for purposes of administration of the Companies Act, 2013 and MoCA because it is the administrative ministry/department for the purposes of administration of Essential Commodities Act, 1955, under which the LPG Control Order of 2000 was issued. Officials said the new owner of BPCL will after three years of takeover get a right to decide on retaining the business of selling subsidised LPG. The firm’s cooking gas LPG customers will be transferred to IOC and HPCL in case the new owner does not want to continue with such a business, the officials added. The government gives 12 cooking gas (LPG) cylinders of 14.2-kg each to households in a year at a subsidised rate. There is no subsidy being paid in most parts of the country but a subsidy will be directly paid into the bank accounts of the users in case prices rise steeply. The government is selling its entire 53 per cent stake along with management control in BPCL. The new owner will get 15.33 per cent of India’s oil refining capacity and 22 per cent of the fuel marketing share. It also owns 18,652 petrol pumps, 6,166 LPG distributor agencies and 61 out of 260 aviation fuel stations in the country.
Why govt is not cutting petrol, diesel prices; Rs 1300 billion oil bond repayments due for cheap fuel in past
While Prime Minister Narendra Modi’s government faces growing clamour to rein in rising petrol and diesel prices by cutting taxes, the reason for it not yielding to the demand can be traced back to the early 2000’s. The present and the next governments have a bill worth Rs 1300 billion to pay, thanks to the then governments’ largesse of keeping petrol and diesel prices in check. Of late, retail fuel prices hit over Rs 100 per litre in many states, including national capital Delhi. Notably, various central and state taxes make up for up to 60 per cent of fuel prices. The central government mopped up Rs 3720 billion in excise duty on crude oil and petroleum products in the last financial year 2020-21; while the state governments collected Rs 2030 billion in sales tax and VAT on petrol and diesel. On the other hand, the government has to pay towards the redemption of outstanding oil bonds worth over 1000 billion rupees. What are oil bonds? Why did governments issue? Oil bonds were issued in lieu of cash subsidy to oil marketing companies (OMCs) in former Prime Minister Manmohan Singh’s UPA era, and also Atal Bihari Vajpayee’s NDA rule. These sovereign oil bonds, issued in favour of oil companies Indian Oil Corp, HPCL and BPCL, were transferable, allowing these companies to raise immediate cash at the time. The government, being the issuer, would bear the interest payments and redemption at maturity. During that time, OMCs were selling fuel at lower than international market prices to keep it affordable. The government compensated those companies for it The government has a liability to pay Rs 200 billion in the current fiscal year 2021-22 in the form of bond repayment and interest on the outstanding oil bonds. While for the next six years, the government has a total debt obligation worth Rs 1300 billion. Union Petroleum Minister Dharmendra Pradhan (before the recent Cabinet reshuffle) blamed the UPA regime for issuing oil bonds, saying that this is the main reason behind the hike in fuel prices. He said that the Congress-led UPA, left billions dues which the Modi government has to pay in the coming years. He also stated that there has been a rise in the prices of crude oil in the international market. To fulfill the domestic needs, India has to import 80 per cent oil, which is the main reason for the rise in petrol, diesel prices. Last month, Amit Malviya, national president of the IT cell of the BJP, in a tweet said that the increase in petrol and diesel prices has been a legacy of UPA’s mismanagement. “We are paying for the oil bonds that will come up for redemption starting FY2021 till (2026), which were issued by UPA to oil companies for not increasing retail prices then! Bad economics, bad politics,” a part of the tweet read. Total oil bonds payout stands at Rs 1300 billion. In the 2021-22 receipt budget, as per annexure 6E titled ‘Special Securities Issued to Oil Marketing Companies In Lieu Of Cash Subsidy’, pending liabilities related to oil bonds were Rs 1309.2317 billion. This means an amount of Rs 1309.2317 billion was the total value of pending oil bonds by the end of 2020-21.