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Why do we pay so much for petrol?

July 10, 2006 15:02 IST

The oil companies, and their parent the petroleum ministry, would have us believe (through big ads) that they, ergo the country, will take a big bath of Rs 73,000 crore (Rs 730 billion) of "their" money and so they are, sob-and-more-sob, forced to increase the prices of petrol and diesel.

However, the break-up of the price you and I pay is still a mystery to us. While I hope to resolve it through the sure-but-slow route of the Right to Information Act, here are some pointers to how things are not exactly hunky-dory with the numbers put out for public consumption.

First, the import duties, transportation costs, insurances, cess, central as well as state-level taxes, VATs and finally octroi duties on petro products alone would be enough to support the economy of many states.

Then the oil companies collect tolls for building new highways. Whether these sums reach the government coffers, or whether they evaporate along the way like the motor spirit they are charged for, is like asking a ghost if he will kindly stand still in line while we check if he is a pick-pocket or not.

Then there's the amount the oil companies spend in promoting totally unconnected activities -- this runs into hundreds of crores.

We are advised solemnly by the oil companies to conserve petrol since it will not last forever. Luckily, we already know that. Then, the same oil companies promote highly elitist city-based and dangerous motor-sport events. Wonder how such jamborees get past the pollution control boards.

And all this is nothing compared to the losses due to the way some of these companies are run. Why would the oil companies not sponsor a few buses, instead? It would earn them a lot more publicity and goodwill.

The same oil companies will spend vast sums fighting applications for information, when the queries are as basic as "what is the price of petrol and diesel in such-and-such city." It is, ahem, secret.

It is like Railways pretending that its time-table is a secret document. We do get a cash-memo, but what use is that if the price has been inflated at the retail outlet? What is the simple, single-point way of finding out that the filling station is not over-charging us? There is no way.

A friend, who applied for information along these lines from a small town, had his application thrown out by Indian Oil on an incorrect technicality. I have gone back to Indian Oil on this one.

And, last but not the least -- why are the import and export prices of petroleum products such a big secret, even after the contracts are signed and the ship-loads delivered? As an ex-seafarer and ex-shipbroker with knowledge of these things, I can understand the secrecy that surrounds such deals while the transactions are being effected.

But after the act? The oil has reached India, been discharged, been sold and consumed. Disturbing rumours, which need to be confirmed by the ministry, have reached my ears that India tends to sell or swap/barter petroleum products and crude oils at terms not favourable to the country.

We let go better quality crude and import lower quality products, and lose out in the bargain. These are difficult calculations, no doubt, but thanks to the Internet as well as data available openly for other countries, easily compared.

The petroleum ministry and public sector oil companies have a lot to answer for. Because, at the end of the day, it is not "their" money, but ours. And many of us now know how to analyse this.

The author can be contacted at veeresh@chowk.com

Veeresh Malik, Outlook Money