Marketing and Distribution of Petroleum Products in India

(Updated in July 2011)

Overview:

The public sector oil marketing companies (OMCs) which include Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation Ltd. (HPCL) are primarily responsible for the marketing and distribution of petroleum products in India. With the opening of retail sector for the private players, Reliance Industries Ltd. (RIL), Shell and Essar have also entered the retail marketing related to petroleum products. The marketing and distribution infrastructure in the petroleum sector include - petrol/diesel stations, liquefied petroleum gas (LPG) distributorships, lubricants and greases outlets and the large volume consumer pumps are backed by bulk storage terminals and installations, inland depots, aviation fuel stations, LPG bottling plants and lube blending plants amongst others.  IOCL is the market leader in terms of marketing and distribution of petroleum products.

ROs in India:

The number of retail outlets (ROs) in India has increased from 31,650 in April 2006 to 40,819 in January 2011. IOCL has the widest network of ROs across India with 19,057 ROs as in January 2011. The number of IOCL ROs have increased almost 2.5 times since April 2002. The number of ROs of HPCL and BPCL have almost doubled since 2002. The increase in the the number of ROs in India from 2005-06 to 2010-11 and the petroleum products' retail market share is as follows:

LPG Distributors in India:

The number of LPG distributors in India has increased to 9,686 as in 2010 from 6,477 in 2001. Out of the total 9,686 distributors approximately 30 percent distributors are present in north India in comparison to approximately 15 percent distributors in east India. The distributors number increased to a 9,001 in 2005 from 6,477 in 2001 and then has achieve a plateau. Only 685 distributors have been added since 2005 in a span of five years. The trend of LPG distributors growth in India and the market share of LPG distributors is as follows:

 

 

 

SKO dealers in India:

There has been a very marginal increase in the number of superior kerosene oil (SKO) dealers in India since April 2004. The number of SKO dealers in India as in April 2010 is 6615 as against 6547 in April 2004. However the number SKO dealership has gone down since April 2008 from 6624 to 6615 in April 2010. IOCL is the market leader with respect to number of SKO dealers in India. IOCL has an extensive network of 3,963 dealers out of the total 6,613 dealers in India. IOCL commands almost 60 percent market share. The trend of SKO dealers' growth in India and the market share of SKO dealership in India is as follows:

 

Conclusion:

As reflected above, the number of retail outlets (ROs) in India has increased from 31,650 in April 2006 to 40,819 in January 2011. The number of LPG distributors in India has increased to 9,686 as in 2010 from 6,477 in 2001. There has been a very marginal increase in the number of superior kerosene oil (SKO) dealers in India since April 2004. IOCL is the market leader in terms of marketing and distribution of petroleum products with 47 percent share in retail business, 53 percent share in the LPG distributorship and 60 percent share in SKO dealership.

 

 

Latest News Items. (Click for More)
Increasing investment in oil and gas sector-IV: HPCL's comments on CGD and non-transport fields 7/28/2014 12:00:00 AM
 

Following are HPCL's comments on CGD and non-transport fuels:

Developing City Gas Distributions (CGDs)

  • Allocation of domestic gas to CGD entities for CNG and domestic usage on long term basis will not only promote investment in CGD but also protect the investment made. This will also facilitate for marketing of CNG to transport sector and households at an affordable price.

  • Local body may declare a corridor where different energy pipelines can be laid and ail requisite statutory approvals are given through a Single Window system including compensation to be awarded.

  • The time period commencing from EOl to award of job and commissioning of facilities should be strictly monitored and adhered. Failure to adhere should be linked to monetary penalties.

  • Provision of tax incentives viz. all tax holidays for 7 years.

Market development for non-transport fuels

  • In current practice, pipeline operators like GAIL, GSPL etc. are involved both in gas transportation and gas marketing activities. Though the pipelines are operated on common carrier principle, pipeline operators are not always liberal to give access in those pipelines to other entities even if it is underutilized, to protect their interest in marketing activities. Hence, it is proposed that transportation and marketing activities may be unbundled, so that separate pipeline entity and gas marketing entity operates on arm's length basis. This unbundling will improve gas marketing efficiency and bring more liquidity in terms of pipeline capacity.

  • As per PNGRB guidelines, the gas marketing infrastructure viz. Gas Pipelines and CGD Networks etc. needs to have third party access. The relevant open access codes in relation to gas pipeline and CGD network needs to be implemented in true spirit. As of date, there is no guidelines for open access in LNG Re-gasification Terminal which needs to be developed.

  • There is mismatch between LNG Re-gasification Terminal capacity utilization and Gas pipeline capacity utilization. Pipelines has long gestation period for laying and commissioning after it is planned. In some cases, even after getting statutory approvals, the pipeline companies face agitation from individual land owners which causes further delay for execution/ commissioning. There are several customers, markets which are not connected with pipeline grid and unlikely to be connected in near future. Direct marketing of LNG for automobile sector and Industrial unit will boost usage of LNG/Gaseous fuel in those markets. Though the direct LNG marketing practice is widely accepted internationally, it is in nascent stage in India. Necessary guidelines needs to be formulated for direct marketing of LNG and quick implementation of the same.

  • Because of localized gas production, limited reach of pipeline and beneficial tax structure, there are few markets where usage of gas/CNG has grown leaps and bounds in India. With the expansion of gas pipeline infrastructures, more numbers of users / markets will have access to gas in future. However, to encourage them for usage of gas and develop gas market uniformly across the country, it is suggested to have uniform tax rates across India.

  • 100% VAT waiver for CNG sales.

  • Incentive for customers who are converting to clean fuels by way of tax rebate/exemption, rebate on taxes for equipment procured for setting up of LNG Terminals, etc.

  • Presently, the gas sales agreements and the gas transportation agreements are biased towards seller or transporter. The strict clauses like "take or pay", "ship or pay", "penal clauses", no protection for customer in case of Force Majeure condition etc. makes consumers apprehensive to switch over to gaseous fuel or make any long term commitment. Hence, to encourage consumers, user friendly clauses needs to be drafted in these agreements.



 
Piped gas supply to households in Kochi to be delayed 7/21/2014 12:00:00 AM
 
  • Kochi has to wait for some more time to get piped gas supply to households. The launch of the City Gas Distribution Project in Ernakulam district will be delayed further because of the postponement of bid document sales to August by the Petroleum and Natural Gas Regulatory Board (PNGRB) at the request of bidders. The bids were scheduled to be closed in February this year, which was extended to May and later to July.

  • The Ernakulam district is one of the 14 locations across the country where PNGRB proposed to take up the CGD project to supply natural gas to households, ensuring year-long cooking gas supply without disruption. The PNGRB had first invited bids for gas distribution in 2011, but they were cancelled four times since then. The PSU oil marketing companies and the newly formed Kerala Gas Ltd, a joint venture of GAIL and Kerala State Industrial Development Corporation, had submitted bids for city gas distribution project in the district. The successful bidder will get a five-year exclusivity period and the first mover advantage.

  • According to KP Ramesh, Deputy General Manager of GAIL, Kochi, the delay in implementing the city gas project will deprive Kerala of domestic gas from the pool of 6.4 MMSCMD available as per the Gujarat High Court directives. The implementation of the city gas scheme is a win-win situation for both the government and the consumers as it will reduce the subsidy burden for the government and provide steady supply of cooking gas to households at rates lower than subsidised LPG, Ramesh said. When contacted, the Ernakulam District Collector, MG Rajamanickam said GAIL is awaiting the nod from PNGRB to start a demonstration project of piped gas to 100-plus households near the Cochin SEZ. GAIL has already erected a 2-inch tap and piped gas can be supplied within two months, if permission is granted.

  • The district administration, he said, is hoping on the launch of the demonstration project as it would create awareness among the public on the advantages of piped gas supply. This would help reduce the public resistance on laying pipelines at various places and can be extended to other parts of the State. Asked how long it would take to cover the entire Ernakulam district, he said this could be completed in the city limits at a fast pace as most of the flats have central LPG distribution system. However, laying of pipelines outside the city limits would take time on account of the protest.



 
CAG asks govt why oil marketing companies pay import parity price to pvt refiners for buying petrol, LPG 7/18/2014 12:00:00 AM
 
  • Pulling up the Government, the CAG in its report on Pricing Mechanism of Major Petroluem Products, has observed that the Petroleum Ministry buys petrol, LPG and diesel from private refiners at high prices, thus putting pressure on the margins of State-owned oil marketing companies (OMCs) like Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp. Its main contention was that whether by doing so, private refiners were being provided undue financial benefits.

  • Highly placed sources said that the national auditor in the report (which is a performance audit of the pricing mechanism of these essential products), that is to be laid in Parliament on Friday (July 19), is learnt to have questioned the Government’s logic behind paying import parity price (a substantially high price paid for purchasing petrol, diesel and LPG, based on international rates as India imports them) for these products.

  • The CAG performance audit covers the period between 2007-08 and 2011-12. OMCs sell these products much below market price to the common man and therefore have to bear a huge subsidy burden. While Government has its own refineries from where petrol and diesel as well as LPG is distributed across the country, at the same time in order to meet shortfalls in supplies, these state-owned entities buy small portions of petrol, LPG and diesel from private refiners to bridge their supply gap. The CAG is learnt to have observed in the report that OMCs pay import parity price for these purchases, which puts pressure on their margins and in turn benefits private refiners, who charge high prices for selling these essential products to them.

  • Further to this, the national auditor, sources said, has also looked into the fact that despite petrol prices having been deregulated in 2010, why is it that OMCs continued selling the much required product at less than the market price. They added that CAG mainly trained its attention on the aspect as to whether the OMCs did so in order to facilitate the Government of the day to earn political brownie points, considering the fact that several assembly elections were held during the period covered by the audit report.

  • As a result of this, the OMCs continue to suffer losses on selling petrol below market prices, which reflects significantly in their quarterly as well as annual financial results. Meanwhile, the Petroleum Ministry on its part is said to have explained to the CAG that petrol, diesel and LPG is mostly provided by OMCs for pan India distribution through their State-owned refineries network. Only a small quantity of these products is purchased from private refiners. Also the payments made to private refiners for these purchases is at par with the payments, which are made to domestic refineries owned by the Government.

  • Sources privy to the development said that the Petroleum Ministry in its response to the CAG’s report, is learnt to have informed it that no undue gains were accrued to private refiners, as otherwise the other available option to bridge the supply shortfall of these products would have been of importing them from outside at much higher cost. While the CAG has raised concerns on OMCs paying import parity prices for purchasing essential fuels from private refiners, it is interesting to note that the UPA Government had itself set up an expert group under the Chairmanship of former Planning Commission member Kirit Parikh, for suggesting a pricing methodology for diesel, LPG and kerosene.

  • This panel suggested in its report, that came out in October 2013, at a paradoxical situation where owing to a significant increase in India’s refining capacity has led to a reduction in dependence on imported petroleum products. At the same time though, 77 per cent of crude oil consumed in India, is imported. In such a scenario, the Parikh panel was formed to look into the rationale by Government for continuing to fix refinery gate price (RGP) of sensitive petroleum products on Import Parity Price basis, which assumes that the product is imported.



 
Losses on diesel more than double to Rs 3.40 a litre even after monthly price increases 7/2/2014 12:00:00 AM
 
  • With escalating violence in Iraq spooking international oil markets, losses on the sale of diesel have more than doubled to Rs 3.40 a litre even after monthly price increases. The difference between the cost of diesel production and the retail selling price has widened to Rs 3.40 a litre now after narrowing to Rs 1.62 a litre last month, according to an official statement.

  • The losses doubled even after the Narendra Modi government continued with the previous United Progressive Alliance regime's decision to eliminate subsidy through small doses of monthly price increases. Diesel rates were hiked by 50 paise a litre yesterday. Diesel prices have cumulatively risen by Rs 10.68 a litre in 17 instalments since January 2013 when the UPA government had decided on the monthly hikes. When the Modi government came to power in May, losses on diesel sales stood at Rs 4.41 a litre. They narrowed to Rs 2.80 in the first half of June and then to Rs 1.62 in the second fortnight.

  • The losses had fallen rapidly since March as the prospects of a stable and decisive government under Modi helped the rupee gain against the dollar. Losses on diesel stood at Rs 8.37 per litre in March. Petrol prices were deregulated in June 2010 and have moved more or less in tandem with costs. Besides diesel, oil firms at present lose Rs 33.07 a litre on kerosene sold through the public distribution system (PDS) and Rs 449.17 on LPG, the statement said. "Oil marketing companies are now incurring combined daily under-recovery (revenue loss) of about Rs 271 crore on the sale of diesel, PDS kerosene and domestic LPG. This is greater than Rs 249 crore daily under-recoveries during the previous fortnight," it said. The under-recoveries for 2014-15 are projected to be Rs 91,665 crore compared with Rs 1,39,869 crore in 2013-14.



 
Iraq crisis effect: IOC announces a hike of ₹1.69 per litre in the retail price for petrol and ₹0.50 per litre for diesel 7/1/2014 12:00:00 AM
 
  • Indian Oil Corporation, the country’s largest oil marketing company announced a hike of ₹1.69 per litre in the retail price for petrol and ₹0.50 per litre for diesel, with effect from midnight of June 30. The prices are exclusive of State levies. “Due to the geopolitical unrest in the Middle East, there has been significant increase in international oil prices during the past two weeks,” IOC said in a statement. “The international prices of MS have increased by more than $4 per barrel and the rupee-dollar exchange rate has also deteriorated. The combined impact of both these factors warranted an increase in petrol prices,” the statement added.

  • Retail prices of diesel are being increased every month by ₹0.50 per litre every month since January 2013. IOC said even after the latest increase, the under-recovery on retail diesel stands at ₹3.40 a litre. Prices of public distribution system (PDS) kerosene and domestic LPG remained unchanged. IOC said it suffers under-recoveries of ₹33.07 per litre on PDS kerosene and ₹449/cylinder on LPG. “For the year 2014-15, the company is expected to incur under-recovery of around ₹56,550 crore on the sale of three sensitive products,” the company said in its statement.



 
BPCL Performance Highlights for 2013-14 - Marketing Updates 6/16/2014 12:00:00 AM
 

BPCL has a robust distribution network comprising of 115 storage depots as on March 31, 2014. Other major marketing highlights include:

  • 12 major installations

  • 50 LPG bottling plants,

  • 36 Aviation Service Stations,

  • 12531 Retail Outlets,

  • 3367 LPG Distributorships,

  • 2 lubricant blending plants and 1938 KM cross-country pipeline



 
HPCL Performance Highlights for 2013-14 - Marketing Updates 6/16/2014 12:00:00 AM
 

HPCL highlighted the following marketing updates as on March 31, 2014:

  • Refineries at Mumbai & Visakh with a designed capacity of 6.5. MMTPA & 8.3 MMTPA respectively.

  • Largest Lube Refinery in the country at Mumbai for producing Lube Oil Base Stocks with a capacity of 450 TMTPA.

  • 9 MMTPA capacity Refinery at Bathinda in Punjab in collaboration with Mittal Energy Investments Pte Ltd. and an equity of about 16.95% in the 15 MMTPA Mangalore Refinery and petrochemicals Ltd. (MRPL).

  • Second largest share of product pipelines in India with a pipeline network of more than 2,500 kms

  • Vast marketing network consisting 13 Zonal offices in major cities and 101 Regional Offices

  • Supply & Distribution infrastructure comprising of 35 Terminals, 68 Inland Relay Depots, 35 Aviation Service Stations, 46 LPG Bottling Plants, 7 Lube blending plants and 22 Exclusive Lube Depots.

  • 12869 Retail Outlets, 3506 LPG Distributorships, 1638 SKO/LDO dealerships 189 CNG outlets, 218 Auto LPG Dispensing stations and 94 Commissioning & Forwarding Agents



 
BPCL Performance Highlights for 2013-14 - Marketing Updates 6/13/2014 12:00:00 AM
 

BPCL has a robust distribution network comprising of 115 storage depots as on March 31, 2014. Other major marketing highlights include:

  • 12 major installations

  • 50 LPG bottling plants,

  • 36 Aviation Service Stations,

  • 12531 Retail Outlets,

  • 3367 LPG Distributorships,

  • 2 lubricant blending plants and 1938 KM cross-country pipeline



 
HPCL Performance Highlights for 2013-14 - Marketing Updates 6/13/2014 12:00:00 AM
 

HPCL highlighted the following marketing updates as on March 31, 2014:

  • Refineries at Mumbai & Visakh with a designed capacity of 6.5. MMTPA & 8.3 MMTPA respectively.

  • Largest Lube Refinery in the country at Mumbai for producing Lube Oil Base Stocks with a capacity of 450 TMTPA.

  • 9 MMTPA capacity Refinery at Bathinda in Punjab in collaboration with Mittal Energy Investments Pte Ltd. and an equity of about 16.95% in the 15 MMTPA Mangalore Refinery and petrochemicals Ltd. (MRPL).

  • Second largest share of product pipelines in India with a pipeline network of more than 2,500 kms

  • Vast marketing network consisting 13 Zonal offices in major cities and 101 Regional Offices

  • Supply & Distribution infrastructure comprising of 35 Terminals, 68 Inland Relay Depots, 35 Aviation Service Stations, 46 LPG Bottling Plants, 7 Lube blending plants and 22 Exclusive Lube Depots.

  • 12869 Retail Outlets, 3506 LPG Distributorships, 1638 SKO/LDO dealerships 189 CNG outlets, 218 Auto LPG Dispensing stations and 94 Commissioning & Forwarding Agents



 
Oil Ministry makes benchmark price for ethanol attractive - Major push for ethanol blending programme 6/10/2014 12:00:00 AM
 
  • In a bid to make it more attractive for sugar millers to tender ethanol for the petrol blending programme, the Government has revised the formula for fixing the benchmark price. As a result, the net realisations from ethanol for sugar millers could increase by a tenth from the next sugar season starting October. The move assumes significance as the Government is contemplating a major push to the ethanol blending programme by increasing mandatory blending from the current 5 per cent to 10 per cent in the years ahead. Increase in realisations would lure the sugar mills to offer more ethanol to the oil marketing companies to meet the blending requirement.

  • An inter-ministerial group, consisting of officials from the Ministry of Petroleum and Natural Gas, Food and Public Distribution among others, has recently agreed to tweak the formula to fix the benchmark price. The proposed formula would be based on the average of the refinery transfer price (RTP) or cost of petrol to the oil marketing companies for the previous financial year instead of the lowest RTP.

  • Currently, the benchmark price for ethanol - which stands at ₹44 a litre, is derived from the lowest RTP. At this price, the ex-mill realisations for the factories work out to around ₹38 a litre, while the same for rectified spirit or extra neutral alcohol are marginally higher at ₹40-41 a litre. Petroleum officials said the realisations could go up by ₹1-2 litre, while the sugar industry expects an increase of upto ₹5 a litre from the next tender. The sugar companies have been demanding that benchmark price be fixed taking the average of the RTP for the previous financial year instead of the lowest RTP. The OMCs have so far finalised offers for 65 crore litres of ethanol and so far for the current sugar season and about 35 crore litres has been lifted by them.



 
Monthly diesel price hikes likely to continue as the new government is keen to cut the subsidy bill: Oil Ministry 5/30/2014 12:00:00 AM
 
  • The monthly diesel price hikes of 40-50 paise a litre are likely to continue as the new government is keen to cut the subsidy bill, a top Oil Ministry official has said. The previous United Progressive Alliance government had decided in January 2013 to increase diesel prices in small monthly doses until the difference between the retail price and the cost of production is bridged. “There is no reason why the monthly increases should be discontinued. They will continue till under-recoveries (losses) on diesel are wiped out,” the official said.

  • The next price revision is due on Saturday. State-owned Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp currently lose ₹4.41 on every litre of the fuel sold. The loss, which is made good through government subsidy, has been on a declining trend since March, when it stood at ₹8.37 a litre. The oil firms, which skipped the monthly hike in April, raised diesel prices by ₹1.09 a litre soon after the Lok Sabha elections ended on May 12.

  • Besides, losses on diesel have been coming down as the rupee strengthened against the dollar. Prospects of the BJP-led National Democratic Alliance forming the government with a full majority helped the rupee to appreciate as foreign inflows increased on improved market sentiment. If the rupee gains to 56 to a dollar, all the losses will be wiped out and the fuel will be “automatically deregulated” (free from government control), the official said. The rupee was quoted at 58.86 against the dollar in early morning trade. According to oil ministry data, the rupee appreciated to ₹59.47 per US dollar in the first half of May (based on which the current desired selling prices and the gap between it and retail price is calculated) from ₹60.54 in the second fortnight of April.

  • Besides diesel, oil firms lose ₹33.84 per litre of kerosene sold through the public distribution system, down from ₹34.43 a litre last month. On cooking gas (LPG), the revenue loss has come down to ₹449.13 per 14.2-kg cylinder from ₹506.06 last month. Since the Cabinet move last year, diesel prices had risen by a cumulative ₹8.33 a litre in 14 instalments before the May 12 hike. Oil marketing companies, effective from April 16, now incur a combined daily under-recovery (revenue loss) of ₹318 crore on the sale of diesel, PDS kerosene and domestic LPG. This is lower than the ₹342 crore daily under-recovery during the previous fortnight.



 
HPCL's fourth quarter net profit falls to ₹46.09 bn - Co reports ₹17.34 bn profit for FY14, proposes dividend of ₹15.50 a share 5/29/2014 12:00:00 AM
 
  • Hindustan Petroleum Corporation Ltd (HPCL) has posted a net profit of ₹4,609.24 crore for the quarter ended March 31, down from ₹7,679.3 crore in the corresponding quarter of the previous year. Net sales grew to ₹64,126.81 crore in the quarter from ₹61,228.87 crore a year ago. Net profit for the fiscal ended March 31 rose to ₹1,734 crore from ₹905 crore in the previous fiscal. The company said the increase in profit was mainly due to higher refining and marketing margins. Net sales for the fiscal 2013-14, grew to ₹2.23 lakh crore from ₹2.06 lakh crore in the previous year. Sales of petroleum products in the domestic market were at an all-time high of 30.26 million tonnes (mt) during 2013-14, up 4.1 per cent from the year before, said the company. The state-run oil marketer said the industry growth rate was 1.3 per cent. The pipeline throughput increased to 15.69 mt, compared to 14.04 mt in the previous year.

  • "For 2013-14, HPCL has proposed a dividend of ₹15.50 per share (155 per cent) against ₹.8.50 per share (85 per cent) in the previous year. The dividend would result in a total payout of ₹614 crore, including the dividend distribution tax,” the company said in a statement. Four new product pipelines are currently under implementation at a total cost of ₹2,277 crore and the physical progress achieved in all these pipelines as of March 2014 are on schedule, HPCL said. The company has started making its footprints in the natural gas segment, and in this regard, it has initiated the process of setting up a 5 million tonnes a year liquefied natural gas terminal at Chhara, Gujarat, in a joint venture partnership with SP Ports Pvt Ltd.



 
OilMin draws up priority list - Ministry highlights that PSCs should have been revised based on experiences derived from working on existing PSCs 5/23/2014 12:00:00 AM
 
  • The agenda prepared by the petroleum ministry for the new National Democratic Alliance (NDA) government has skipped the contentious issue of a gas price hike, but it has listed issues of freeze on direct benefits transfer and increase in the subsidised liquefied petroleum gas (LPG) cylinder as avoidable decisions of the United Progressive Alliance (UPA) regime. In a presentation, the ministry highlighted production-sharing contracts are beset by legal disputes and should have been revised based on experiences derived from working on existing PSCs. This comes at a time when an arbitration process is underway between Mukesh Ambani-led Reliance Industries (RIL) and the government over fines imposed by the government amounting to about $1.797 billion in 2010-11, 2011-12 and 2012-13 for production shortfall.

  • It also highlighted there was a lack of clarity on UPA's policy towards Iran, especially after the US imposed sanctions on it. Besides, the loss of focus by national oil companies on exploration and production -- ONGC moving to downstream and midstream activities and HPCL moving to sugar mills -- should have been avoided. It specifies that focus needs to be there on increasing domestic oil and gas production by over 25 per cent in the next five years, with an additional refining capacity of 25 million tonne per annum (MTPA).

  • The ministry is also batting for setting up of a national gas grid and expeditious development on LNG regas terminals on the east coast in the NDA regime. In the upstream, midstream and downstream sectors, the oil and gas industry is in favour of an agenda covering diesel price, reforms in cooking gas distribution, the price of natural gas, a subsidy-sharing formula and clarity on exploration and production rules. It is expected that the annual cap on subsidised cooking gas cylinders would be brought to nine a year for each eligible household.

  • A key move that would decide the course of investments in the upstream segment is the increase in gas prices and a roadmap towards free pricing. The upstream industry is hopeful that the government would take a serious look at the subsidy-sharing formula. "The UPA-II government was close to implementing this (proposing $65/bl net realisation for ONGC/Oil India). The NDA government might choose to implement this by the second quarter of FY15, after taking stock of the oil marketing companies' under-recovery trends," said ICICI Securities.

  • The Bharatiya Janata Party (BJP)'s manifesto promised that oil and gas exploration would be expedited to help reduce the import bill. The industry awaits clarity on E&P reforms and expects the government to stick to the Kelkar committee recommendations on continuing with the cost-recovery mechanism. The BJP had promised a comprehensive national energy policy. This would focus, it said, on development of energy infrastructure, human resource development and upgrading of technology. The party said it considers energy efficiency and conservation crucial to energy security. It mentioned the need to maximise the potential from oil, gas, hydel power, ocean, wind, coal and nuclear sources.



 
Loss on diesel sale down at Rs 4.41 a litre helped by Rs 1.09 a litre hike and strengthening of the rupee 5/20/2014 12:00:00 AM
 
  • The loss on sale of diesel has fallen to Rs 4.41 per litre, helped by Rs 1.09 a litre hike and strengthening of the rupee against the US dollar. State-owned firms Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are losing Rs 4.41 on every litre of diesel sold, down from Rs 6.80 a litre in first half of the month, according to Oil Ministry calculations. The loss, which is made good through government subsidy, has been on a declining trend since March when it stood at Rs 8.37.

  • The oil firms, which skipped in April the monthly hike of 40-50 paise a litre that the Cabinet had decided in January last year for wiping out the losses, raised rates by Rs 1.09 a litre soon after the polling to elect a new government ended on May 12. Besides, the prospects of the BJP-led NDA forming the government with full majority helped strengthened rupee as foreign inflows increased on improved market sentiment, cutting down losses. According to the oil ministry data, the rupee appreciated to Rs 59.47 to a US dollar in the first half of May (based on which the current desired selling prices and the gap between it and retail price is calculated) from Rs 60.54 in the second fortnight of April.

  • Besides diesel, oil firms are losing Rs 33.84 a litre on kerosene sold through the public distribution system, down from Rs 34.43 a litre last month. On cooking gas (LPG), the revenue loss has come down to Rs 449.13 per 14.2-kg cylinder from Rs 506.06 last month. Diesel prices had risen by a cumulative Rs 8.33 a litre in 14 instalments before the May 12 hike since the Cabinet move last year. Oil marketing companies, effective April 16, 2014, are now incurring combined daily under-recovery (revenue loss) of Rs 318 crore on the sale of diesel, PDS kerosene and domestic LPG. This is lower than Rs 342 crore daily under-recovery during previous fortnight, it said.



 
OMCs may get Rs 110 billion more than budgeted subsidy - Amount proposed to be given in form of 'comfort letter' from finance ministry 5/14/2014 12:00:00 AM
 
  • The Oil Marketing Companies (OMCs) are slated to receive an additional Rs 11,000 crore of subsidy from the government in addition to the Rs 22,000 crore slated to be given as roll over for the first quarter of the current financial year within a week’s time. According to official sources, the oil marketing companies will receive a total of Rs 33,000 crore of subsidies for the first quarter of the current financial year. They added that part of the subsidy to the tune of Rs 22,000 crore is rolled over from he last quarter of the last financial year.

  • Rest of the amount is proposed to be given in the form of “comfort letter” from the ministry of finance. The entire amount will be given within next week before these companies prepare their financial results. According to sources, the government had allocated Rs 66,000 crore for petroleum subsidies of which, Rs 45,000 crore was used to pay oil marketing companies for the subsidy gap in the previous financial year. Accordingly, only Rs 20,000 crore to meet its share of the shortfall between the subsidized price and the market price (under recoveries) and thus rest of the amount was proposed to be given in the form of comfort letter. The new government would announce a full-fledged Budget for 2014-15 around mid-2014.

  • A comfort letter is a document that an accounting firm prepares to assure the backing of the company or the financial soundness. In case of government affairs, this document refers to the assurance of the state or federal government to a supplier or lender of a public enterprise to support the enterprise for settling its obligations timely. For the first half of this financial year, the total under recoveries from diesel, kerosene (distributed through the Public Distribution System) and liquefied petroleum gas (LPG) was Rs 60,900 crore. Diesel subsidies accounted for Rs 28,300 crore.

  • In January this year, the government had announced steps to further deregulate the oil sector by allowing diesel for industrial use to be priced at market prices. It had also allowed refining and marketing companies to increase the prices for retail diesel 50 paisa a month which led to a steady decline in diesel under recoveries. The government also restricted the number of subsidized LPG cylinders (on which it incurred an average subsidy of Rs 408 each) to nine per family, per year. Reportedly, Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) would have to shoulder a greater part of the total under recoveries. In first half of this financial year, ONGC and OIL shared the burden of 52.5% of the total under recoveries, against about 40 percent in earlier.

  • According to a study by the Petroleum Planning & Analysis Cell, the public sector Oil Marketing Companies (OMCs) currently lose Rs 399 crore daily on selling the diesel, PDS kerosene, domestic LPG at government controlled rates. More specifically, the loss is around Rs 7.16 per litre on diesel and Rs 36.34 per litre on kerosene sold through the public distribution system, while on domestic LPG the oil marketing companies lose around Rs 605.80 crore on sale of each cylinder. If these subsidies are not compensated, their borrowings from the market will increase. Currently the OMCs has borrowed around Rs 1, 30,000 crore. The government has taken decision to increase the diesel prices by 50 paisa per month and since January 2013 the prices have risen by more than Rs 8.



 
Petroleum Ministry's RFD, 2014-15: Targets for next three years 5/5/2014 12:00:00 AM
 

The Petroleum Ministry recently prepared its Results Framework Document (RFD), 2014-15. Following targets have been spelt put for the next three years beginning 2014-15:

Sr. No. Outcome Jointly responsible for influencing this outcome Success Indicator Unit FY 14/15 FY 15/16 FY 16/17
1

Overseas oil and gas production

OVL

Overseas oil and gas production

MMToe 7.664 10.072 10.577
2

Increasing refining Capacity

Oil refineries

Commissioning of 15 MMTPA Paradip Refinery

MMTPA 15    
4

Ensuring availability of petroleum products across the nation with respect to marketing and distribution

OMCs

Quantity of LPG made available

MMT 16.6 18.86 19.92

Issuance of Letter of Intent for Rajiv Gandhi Gramin LPG Vitrak Agencies

Number 1025 800 800

Quantity of diesel made available

MMT 71 76.9 81.6

Quantity of petrol made available

MMT 16.93 20.77 22.59
6

Enhanced production of domestic oil and gas in the country for achieving self sufficiency in the energy requirement for the country

ONGC

Production of Oil by PSUs

MMT 23.5 25.2 24.4
7

Enhanced production of domestic oil and gas in the country for achieving self sufficiency in the energy requirement for the country

OIL

Production of Oil by PSUs

MMT 24.3 30.44 29.65

Natural gas production by PSUs

BCM 23.40 32.48 43.12

natural gas production by private/JV

BCM 3.64 14 16.50

Production of crude oil by private/JV

MMT 9.7 12.10 11.50
8

Joint responsibility for power and fertilizer sectors

Oil and Gas PSUs importers of RLNG

supply of gas to power and fertilizer sector

MMSCM D 65 70 75
10

Ensuring availability of petroleum products across nation with respect to marketing and distribution

OMCs

Quantity of LPG made available

MMT 47.63 66.49 86.41

Issuance of Letter of Intent for Rajiv Gandhi Gramin PG Vitrak Agencies

number 3405 4305 5105

For details please mail your query to support@infraline.com



 
HPCL's Non-Plan Capital Budget, 2014-15: Company to go aggressive on marketing 4/22/2014 12:00:00 AM
 
  • HPCL's proposed budget for new marketing projects in NPCB 2014-15 is estimated at Rs. 3797 crore, which is higher than Rs. 2065 crore under NPCB 2013-14.

  • The estimated carryover as of April 1, 2014 is Rs. 1270 crore. Thus, the Gross Marketing project cost for NPCB 2014-15 including carryover is projected at Rs. 5067 crore as against Rs. 3932 crore for NPCB 2013-14. Out of this, Rs. 3543 crore is expenditure target in 2014-15 which includes Rs. 1077 crore towards carryover and Rs. 2466 crore towards new proposals.

  • The budget of new projects proposed in Retail segment is Rs. 750 crore as against Rs. 690 Crore in 2013-14. Of this, Rs 194 crore will be spent towards modernisation of the existing 500 Retail Outlets and another Rs 180 crore for 350 New Co-owned Retail Outlets.

  • The proposed budget of new projects proposed under Operations and Distribution (O&D) is Rs. 1494 crore as against Rs. 524 crore for 2013-14 and for LPG at 1,339 crore as against Rs 695 crore in 2013-14.

  • For more details please mail your query to support@infraline.com



 
No diesel price hike till the end of the road for UPA-2 - New regime to steer pricing policy after EC signals diversion of govt proposals via Cab Secretariat 4/21/2014 12:00:00 AM
 
  • Amid a spate of government proposals at its door, the Election Commission has asked all Union government departments to route their proposals through the Cabinet Secretariat. This means the freeze on diesel prices continues. The proposal on revising prices, pending before the commission, will have to be resent by the oil ministry through the Cabinet Secretariat. With the general elections notified on March 5, the model code of conduct became binding on the government, political parties and electoral candidates until the end of the election process. A senior government official says any diesel price hike is unlikely till a new government is in place. With this, the government has given a quiet burial to the phased decontrol of diesel prices. Any decision on further price increases will lie with the new government.

  • Oil marketing companies (OMCs) have been raising diesel prices by 50 paise a month since January 17, 2013, as part of phased decontrol. The Kirit Parikh committee had in October 2013 recommended a Rs 5 increase in one go. But the government did not take that proposal forward. "A decision on revision in retail prices for diesel shall be taken on receipt of further advice from the government," an IndianOil statement had said on March 31.

  • The statement also said the under-recovery on retail diesel was Rs 5.93 a litre (at the beginning of April). That was lower than Rs 6, the interim subsidy cap recommended by the Parikh panel; so, the issue of monthly price rises came under consideration of the government and was referred to the Election Commission. The under-recovery or revenue loss incurred by OMCs by selling diesel below the global price has come down to Rs 5.49 a litre from Rs 7.16 a month ago. In May 2013, it was just Rs 2.50 a litre, but the gap again rose to Rs 14.5 in mid-September, primarily due to the rupee's depreciation against the US dollar.

  • Complete decontrol of diesel prices will mean that the government or any of its companies do not have to bear revenue loss on retail sales of the fuel. There will be no revenue loss as the retail price will be benchmarked to the 0.05 per cent sulphur content Arab Gulf gasoline price. Applicable tax and margins would be built on top of the benchmark price.

  • The three state-run OMCs together suffered revenue loss of around Rs 1,41,000 crore on sale of the three controlled products - diesel, LPG and kerosene - last financial year, with a net impact of Rs 40,000 crore after taking into account government subsidy and upstream discounts. The OMCs have under-recoveries of Rs 34.43 a litre on kerosene (sold through the public distribution system) and Rs 505.50 a litre on domestic liquefied petroleum gas (LPG). The projected under-recoveries of IndianOil on the three items are Rs 62,000 crore for 2014-15. The figure for the sector is Rs 1,20,000 crore. Although phased decontrol of diesel prices has been stalled, the OMCs have reduced petrol prices twice this month. The prices in Delhi were cut by Rs 0.90 a litre in the first instance and subsequently by Rs 0.85 a litre.



 
Reliance Industries posts flat net profit in Q4 - Sales rise 13 per cent to ₹978.07 billion 4/19/2014 12:00:00 AM
 
  • Reliance Industries Ltd (RIL) posted a marginal rise in net profit for the fourth quarter ended March 31 at ₹5,631 crore, a 0.8 per cent increase from the ₹5,589 crore reported in the year-ago period. Turnover rose 13 per cent to ₹97,807 crore. The board of directors has recommended a dividend of ₹9.50 per fully paid-up equity share of ₹10, aggregating ₹3,268 crore, including dividend distribution tax. Higher refining margins during the quarter offset the decline in earnings from RIL’s core oil and gas exploration and production (E&P) business.

  • While revenue from refining and marketing improved 12.5 per cent in the fourth quarter to ₹87,624 crore against ₹77,872 crore a year ago, revenue from the E&P business was at ₹1,417 crore, declining 11.3 per cent. RIL said its KG-D6 field produced 178 BCF (billion cubic feet) of natural gas in 2013-14, a fall of 47 per cent from a year ago. Meanwhile, the company’s gross refining margins (GRMs) - the difference between the cost of processing crude and the selling price of the finished petroleum product - rose to $9.30 a barrel for the quarter from $7.60 in the previous quarter.

  • For the full year, the company’s net profit grew a modest 5 per cent to ₹21,984 crore in FY14 against ₹21,003 crore in FY13. “FY14 was a satisfying year for RIL. The refining business delivered the highest-ever profits with a sharp recovery in GRMs towards the end of the year. Petrochemical earnings grew sharply with margin expansion across polymers and downstream polyester products,” said Mukesh Ambani, Chairman and Managing Director. “We have also accelerated efforts to roll out our 4G services across the country, which will add an exciting new dimension to our consumer-facing service offerings,” he added.



 
Loss on diesel sales falls to Rs 5.49 a litre after appreciation in the value of the rupee 4/17/2014 12:00:00 AM
 
  • The loss on sale of diesel has been trimmed by 44 paise to Rs 5.49 a litre after appreciation in the value of the rupee made imports cheaper. State-owned firms Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are losing Rs 5.49 on every litre of diesel sold, down from Rs 5.93 a litre in the first half of the month, an official statement issued here said. The loss, which is made good through government subsidy, has declined since March as the rupee strengthened against the dollar and global oil prices softened.

  • Oil firms lost Rs 8.37 a litre in the first half of March, which came down to Rs 7.16 in the second fortnight. The decline continued in April. The rupee has strengthened to 60.07 to a dollar from 60.90 previously, resulting in a fall in the under-recovery or revenue loss to Rs 5.49, the statement said. Besides diesel, oil firms are losing Rs 34.43 a litre on kerosene sold through the public distribution system, down from Rs 36.34 a litre last month. On cooking gas (LPG), the revenue loss has come down to Rs 506.06 per 14.2 kg cylinder from Rs 605.80 last month. The fall in under-recovery has meant that monthly diesel price hikes have been put on hold. Oil firms did not effect the price hike on April 1 on the grounds that the loss on sales of the fuel has fallen to less than Rs 6 a litre.

  • IOC said on March 31 there was no need to increase rates further because an expert committee headed by Kirit Parikh had suggested that the government should provide a subsidy of Rs 6 a litre on diesel. Since the oil firms are guaranteed Rs 6 a litre subsidy, they decided not to raise the rates any further. The Cabinet had in January last year decided that diesel prices should be raised by 40-50 paise a litre every month until losses on the fuel are wiped out. Diesel prices have risen by a cumulative Rs 8.33 a litre in 14 instalments since January 2013. “Oil marketing companies, effective April 16, 2014, are now incurring combined daily under-recovery of about Rs 337 crore on the sale of diesel, PDS kerosene and domestic LPG. This is lower than Rs 342 crore daily under-recoveries during previous fortnight effective April 1,” the statement said.



 
Click for More