FUEL SCENARIO IN INDIA - Prepared for Research Symposium Urban Mobility India November 26th,2014 Riya Rahiman Umang Jain
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FUEL SCENARIO IN INDIA
Prepared for
Research Symposium
Urban Mobility India
November 26th,2014
Riya Rahiman
Umang JainINTRODUCTION
Energy plays a vital role in the socio-economic
development of a nation.
In 2011- 12 the majority share of energy consumption
was by the Industrial sector with 47%
Transport sector accounted for 6.9%.
Source: (Central Statistics Office, GoI, 2013)
Contd….Transport sector and oil products consumption in 2011-12
India faces a pervasive imbalance in the demand and supply of
energy.
India is highly dependent on import of crude oil.
More than 77% of India’s crude oil requirements are met through
imports.
In 2012-13 there was a 6% rise in consumption of petroleum
products from the previous year.
Source: (Central Statisitcs Office,GoI, 2013) ,(nielsen, 2013).FUEL PRICING
Retail selling prices of only 3 products i.e. Diesel (retail
sales), PDS Kerosene and Subsidized Domestic LPG are
regulated by the Government.
The prices of Petrol are market determined.
The Refinery Gate Price of Diesel is based on Trade Parity
Price (TPP) consisting 80% of Import Parity Price (IPP) and
20% of Export Parity Price (EPP).
Contd….Price built up for Petrol effective on 16.01.14-Delhi
No Elements Unit Amount
1 C&F (Cost & Freight) Price of Gasoline (Petrol) $/bbl 116.01
BS III equivalent
2 Average Exchange rate Rs/$ 62.07
3 Refinery Transfer Price (RTP) on landed cost Rs/Ltr 46.21
basis for BS IV Petrol (Price Paid by the Oil
Marketing Companies to Refineries)
4 Price Charged to Dealers (excluding Excise Rs/Ltr 48.87
Duty and VAT)
5 Add : Specific Excise Duty @ Rs.9.48/Ltr Rs/Ltr 9.48
(Rs.9.20/ Ltr+ 3% Education cess)
6 Add : Dealer Commission Rs/Ltr 2.01
7 Add : VAT (including VAT on Dealer Rs/Ltr 12.07
Commission) applicable for Delhi @ 20%
8 Retail Selling Price at Delhi- (Rounded) Rs/Ltr 72.43
• The price built up shows that 33% of the total retail prices are
constituted by taxes and dealer commission.
• Basic excise duty, dealer commission and VAT lifted the depot
price by one third.
Source: (Petroleum and Planning Analysis Cell, 2014)Price built up for Diesel effective on 16.01.14. -Delhi
No. Elements Unit Amount
1 C&F (Cost & Freight) Price Rs./Litre 48.10
Import Charges (Insurance/Ocean Loss/ LC Charge/Port
2 Dues) Rs./Litre .44
3 Customs Duty @2.58% (2.50% + 3% Education cess) Rs./Litre 1.25
4 Import Parity Price (at 29.5º C) Rs./Litre 49.79
5 Export Parity Price (at 29.5º C) Rs./Litre 47.44
6 Trade Parity Price (80% of (4)+20% of (5)) Rs./Litre 49.32
7 Refinery Transfer Price (RTP) Rs./Litre 49.32
Add: Premium recovered, delivery charges, Marketing .04+1.01+.69+.7
8 cost of OMCs Rs./Litre 1
Total Desired Price -Before Excise Duty, VAT and Dealer
9 Commission Rs./Litre 51.77
10 Less: Under-recovery to Oil Marketing Companies Rs./Litre 8.47
11 Price Charged to Dealers (Depot Price)( Rs./Litre 43.3
Add : Specific Excise Duty @ Rs.3.56/Litre
12 (dealer commission and VAT Rs./Litre 3.56+1.19+6.29
13 Retail Selling Price at Delhi Rs./Litre 54.34
•The depot price is lesser than the retail selling price.
• Price built up shows that 20% of the total retail prices are constituted
by taxes and dealer commission and lifted the depot price by one fifth.FUEL SUBSIDIES
Subsidies are provided for three petroleum products-
PDS kerosene, domestic LPG and diesel.
Subsidies covers only a part of the difference between
the cost price (including marketing costs) and the selling
price of these three petroleum products, thereby
resulting in “under-recoveries” for the Oil Marketing
Companies (OMCs).
The difference between the desired price of a petroleum
product for supply to OMCs’ dealers/distributors and the
government-controlled price of that product is referred to
as the gross under-recovery per unit of the product.
Contd….Calculation of under recoveries
Subsidies and under recoveries 2012-13
Source: (Ministry of Petroleum and Natural Gas;GoI, 2013) Contd….Total Under Recoveries of Petroleum Products 2012-13
180000 2012-13
160000
140000 PDS
120000 Kerosene
18% Domestic
100000
LPG
80000
57% 25% Petrol
60000
40000 Diesel
20000
0
PDS Kerosene Domestic LPG
Petrol DieselTRANSPORT DEMAND
Total consumption of petroleum products:
Diesel constitutes 44%
Petrol constitutes 10%
Transport sector consumes:
Diesel- 70%
Petrol- 99.6%
Source: (nielsen, 2013). Contd….Diesel and Petrol Consumption
% share in total % share in
End use Segments diesel sales total petrol
Private 13.5 End use Segments sales
Commercial 8.94
Cars/SUVs Three wheelers 6.39
2 wheelers 61.42
Trucks:
HCV/LCV 28.25
Buses/STUs 9.55 2/3 wheelers 3 wheelers 2.35
Aviation/Shippi
Commercial ng 0.48 Subtotal 63.77
Vehicles Railways 3.24
Sub Total transport 70
Cars 34.33
Tractors 7.4
Utility
Agri pump sets 2.9
vehicles
Agriculture
includes
Agriculture implements 2.7
4 wheelers SUVs 1.51
Subtotal Agriculture 13
Power Gen Gensets 4.06
Industry Industry 4.96 Sub total 35.84
Mobile Towers Mobile Towers 1.54 others(inclu
des informal
Others 6.45 Others sale) 0.39
Sub total 17
Total 100 Total 100
Source: (Press Information Bureau, GoI, 2014)The total under recovery on Diesel during 2012-13 was Rs. 92,061 crores (57.2% ) Based on the sector-wise consumption pattern of diesel the total under recovery of Rs. 92,061 crores went to: Owners of private cars and utility vehicles (UV) -Rs. 12,100 crores Commercial cars and UV-Rs. 8,200 crores HCV/LCV-Rs. 26,000 crores Buses-Rs. 8,800 crores Agriculture sector-Rs. 12,000 crores Other sector- Rs. 15,600 crores This clearly indicates how the well off are also benefitting from the subsidies and there is no economic or social reason to provide subsidy on diesel to these consumers. Increase in price gap between petrol and diesel has led to the to shift from the petrol cars and increased usage of diesel passenger cars. Dieselization taking place with consequent adverse affects on the environment.
Vehicles and Fuel Consumption
Diesel Diesel Petrol Petrol Total
Year vehicles consumption vehicles Consumption Vehicles
(million) (MT) (million) (MT) (million)
2000-01 8 37.96 47 6.61 55
2005-06 12 40.19 78 8.65 90
2006-07 13 42.90 84 9.29 97
2007-08 14 47.67 91 10.33 105
2008-09 100 11.26 100 11.26 115
2009-10 17 56.32 111 12.82 128
2010-11 18 60.07 124 14.19 142
2011-12 20 64.75 140 14.99 160
Source: (Ministry of Road Transport and Highway, 2012), (nielsen, 2013) Contd….Projections for number of vehicles up to 2040(millions)
Diesel
Diesel
6% GDP GDP GDP
Year BAU 5% Petrol
Petrol 7.5% 8% 8.5%
12%
11%
2016-17 263 262 271 272 281 291
2021-22 435 432 466 464 495 529
2026-27 721 716 716 789 873 965
2031-32 1,194 1,191 1,191 1345 1,538 1758
2032-37 1,980 1,985 1,985 2292 2,711 3204
2039-40 2,424 2,436 2,436 2,837 3,401 4073
5000
4000
Vehicle ii millions
3000
2000
1000
0
2016-2017 2021-2022 2026-2027 2031-2032 2032-2037 2039-2040
BAU Diesel 6% Petrol 11% Diesel 5% Petrol 12%
GDP 7.5% GDP 8% GDP 8.5%
Source: Authors Compilation Contd….Projections for fuel consumption up to 2040 (MT)
Years BAU GDP 7.5% GDP 8% GDP 8.5%
2016-2017 122 136 141 145
2021-2022 187 232 248 265
2026-2027 286 395 436 482
2031-2032 438 672 769 879
2032-2037 671 1,146 1,356 1,602
2039-2040 796 1,418 1,700 2,036
2,500
Total fuel consumption(MT)
2,000
1,500
1,000
500
-
2016-2017 2021-2022 2026-2027 2031-2032 2032-2037 2039-2040
BAU GDP 7.5% GDP 8% GDP 8.5%
Source: Authors Compilation Contd….The average of the projections of the different scenarios
shows that by 2040 increase in:
Number of Vehicles - 18 times
Fuel consumption - 19 times.
In India approximately 140,000 people die of traffic accidents
every year.
Increased number of vehicles will lead to increased pressure
on roads, apparent that the rate of road accidents will only
increase.
With increasing number of vehicles the concomitant
emissions will also rise thus deteriorating the air quality.
Imperative that increased vehicular emissions and high rate of
accidents due to rise in number of vehicles and the increased
pressure on roads be addressed.
Source: (Ministry of Road Transport and Highways, 2011).CONCLUSION & RECOMMENDATIONS
Being largely dependent on imports, India needs to be
prepared to meet its future petroleum requirements.
Cannot be met by domestic production as at the present
pace the reserves will last only for another 17.5 years
With the GDP growth, the transport sector will flourish and
the resultant petroleum requirements will be considerable.
With the rise in number of vehicles, concomitant emissions
and traffic accidents are bound to increase.
To enhance energy security, to reduce the number of vehicle
on road, to improve road safety and cut down on vehicular
emissions, the A-S-I (Avoid-Shift-Improve) approach can
be used
Source: (MoPNG, 2013).Avoid Reducing or avoiding the need to travel using motorized modes. This can be achieved through transit orient development, integrated land use planning, making use of information technology and thereby reducing the need to make trips. Shift Maintaining a share of more environmentally friendly options i.e. a modal shift from transport modes that consume considerable amount of energy and emit GHGs to more environmental friendly options like Non Motorised Transport (NMT), and public transport. Improve Improving the energy efficiency of transport modes and vehicle technology. It can be pursued by improving energy efficiency of transport modes, fuel quality, and vehicle emission standards and introduction of alternative energy.
Deteriorating air quality is a pressing issue that most Indian cities face today. India heavily lags behind in its vehicle emission standards and need to establish a roadmap for vehicle emission and fuel quality standards. Rapid adoption of ultra-low sulphur fuels and BS VI vehicle emission standards would dramatically improve India’s air quality to the benefit of public health. Alternative transport fuels have to be promoted and brought into the mainstream to tackle the twin objectives of reducing vehicular emissions and import dependence Diversifying fuel basket with the introduction alternative fuels will provide the much needed energy security with the environment being considered.
THANK YOU
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