INDIA OIL & GAS
THE HIKE IMPACT
E: [email protected] www.sumedhafiscal.com
September 15, 2012
India Oil & Gas
background In a major move The Cabinet Committee on Political Affairs (CCPA) decided to increase diesel prices by Rs. 5/Ltr excluding VAT effective from midnight of 13th/14th September 2012. Along with diesel, the committee also decided to put a cap on number of subsidised cooking gas cylinder for domestic use. Domestic LPG users will now get a maximum 6 cylinders (14.2kg/cylinder) per year at subsidised rate. For using more than 6 cylinders, users have to pay at market driven prices. After this hike, the effective retail price of diesel in Delhi will increase to ~Rs. 47.06/Ltr from Rs. 41.32/Ltr. As per our estimation, total under recoveries on sale of diesel would be reduced by Rs. 16734 Crore from Rs. 131155 Crore to Rs. 114421 Crore in FY 2013. Likewise under recoveries on LPG would be reduced by Rs. 6700 Crore to Rs. 27827 Crore in FY 2013. Under recoveries on sale of diesel and LPG in FY 2012 was Rs. 111189 Crore. So post hike also, under recovery would be Rs. 33000 Crore higher in FY 2013 compared to FY 2012. So overall effect on fiscal deficit is not very significant. The government is facing stiff protest over this move. Along with opponent, Congresss allies are also against this decision. We wont be surprised if the government takes partial rollback decision on diesel and LPG. Under recoveries - diesel FY 12 Diesel Consumption (MT) 64.74 Avg. Monthly Consumption (MT) 6.03 FY 12 Under Recoveries on Selling Diesel (Rs Cr) 81192 Period Left in FY 13 (Months) 6.65 Apr-Jul FY 13 Diesel Consumption MT 24.12 Exp Consumption in rest of FY 13 (MT) 40.09 FY 13 Diesel Consumption (MT) - Expectation 72.35 Exp Consumption in rest of FY 13 (Mn Ltr) 47811 Apr-Jun FY 13 Under Recoveries on Selling Diesel (Rs Cr) 29042 Exp Under recoveries without hike (Rs Cr) 81552 Expected Under Recoveries Till Sep 13, FY 13 22750 Exp Under recoveries after hike (Rs Cr) 64818 Expected Under Recoveries from Sep 14 to Mar 31, FY 13 64818 Total Under Recoveries - on sale of Diesel (Rs Cr) 116610 Total Under Recoveries - on sale of Diesel - without hike (Rs Cr) 133343 Savings (Rs Cr) 16734 Assumption/Consideration: INR/USD 55.52 for rest of the period. Arab Gulf of Gasoline prices - $134.84/bbl for rest of the year. Any change will have impact on under recoveries. Conversion factor: 1 ton of Diesel = 7.5 barrels, 1 barrels = 159 liters. Diesel consumption for rest of the year in FY 13 based on historical trend. Source: PPAC/SFSL Research
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Price build up - diesel Unit $/bbl $/bbl $/bbl INR/USD Rs/Ltr Rs/Ltr Rs/Ltr Rs/Ltr Rs/Ltr Rs/Ltr Rs/Ltr Before Hike 134.84 1.65 136.49 55.52 47.66 0.44 1.23 49.33 47.08 48.88 48.88 0.04 0.77 0.67 0.730 51.09 17.06 34.03 2.06 0.91 4.62 41.32 After Hike 134.84 1.65 136.49 55.52 47.66 0.44 1.23 49.33 47.08 48.88 48.88 0.00 0.04 0.77 0.67 0.73 51.09 13.56 37.53 3.56* 0.91 5.06 47.06
FOB Prices at Arab Gulf of Gasoli (Diesel) - BS III equivalent Add: Ocean Freight from AG to Indian Ports C&F (Cost & Freight) Prices Currency C&F (Cost & Freight) Prices 4 Import Charges (Insurance/Ocean Loss/LC Charge/Port Dues) 5 Custom Duites (2.5%+3% Education Cess) 6 Import Parity Prices - IPP 7 Export Parity Price (Here FOB of Diesel - Srl 1) - EPP 8 Trade parity Price (80% IPP+20% EPP) 9 Refinery Transfer Price (RTP) - For BS III (Prices paid by OMC to refineries) 10 Premium Recover for BS IV over BS III Rs/Ltr 11 Inland Freight & Delivery Charge Rs/Ltr 12 Marketing Cost to OMC Rs/Ltr 13 Marketing Margin to OMC Rs/Ltr 14 Total Desired Price Rs/Ltr Before Excise duty, VAT and Dealer Commission 15 Under-recovery to Oil Marketing Companies Rs/Ltr 16 Price Charged to Dealers (Depot Price) Excluding Excise Duty & VAT 17 Add: Specific Excise Duty @ Rs. 2.06/L Rs/Ltr (Rs 2.00/L+3% Education Cess) 18 Add: Dealers Commission Rs/Ltr 19 Add: VAT including VAT on Dealers Commission) applicable Rs/Ltr for Delhi @ 12.5% and Air Ambiance Charges @250/KL 20 Retail Selling Prices at Delhi Rs/Ltr *As per the new duty structure, out of Rs. 5/Ltr increase, Rs. 1.5/Ltr is for excise duty. Source: PPAC/SFSL Research
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Under recoveries - LPG Country's LPG connection (Lakh) LPG consumption in FY 12 (MT) LPG consumption in Apr-Jul FY 13 (MT) Expected consumption in FY 13 (MT) Connections where usage is more than 6 cylinder/yr (Lakh) Average usage/yr - who use more than 6 cylinder/yr (Kg) Average usage/yr - who use more than 6 cylinder/yr (no. of cylinder) Under recoveries per cylinder (Rs) Total savings/yr on implementation (Rs Cr) Expected savings in the remaining part of FY 13 (Rs Cr) Under recoveries in FY 12 (Rs Cr) Apr-Jun FY 13 under recoveries (Rs Cr) Expected under recoveries in FY 13 (Rs Cr) Usage pattern Percent user No. of cylinder No. in Lakh 29% 4 or less 398 38% (Cummulative) 5 or less 123 44% (Cummulative) 6 or less 82 56% More than 6 768 LPG consumption for rest of the year in FY 13 based on historical trend Source: PPAC/SFSL Research 1371 15.39 5.16 15.48 768 152 11 347 12468 6753 29997 11495 27827
Total usage (MT) 2.26 0.88 0.70 11.64
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Sector performance
Source: PPAC/SFSL Research
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Sector performance
Source: PPAC/SFSL Research
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