AIYF goes to SC Over Oil Price Deregulation

The AIYF has filed a Writ Petition before the Supreme Court with the following Prayers:

(This was filed on 22/10/2011)

a) Issue an appropriate WRIT or an Order prohibiting the price fixing of Petroleum products by the Public Sector Oil Marketing Companies (OMC’s) collectively.

b) Issue an appropriate WRIT or an Order directing the Union of India to restore theAdministered Pricing Mechanism (APM) in setting the price of Petroleum products.

c) Issue an appropriate WRIT or an Order directing the Union of India and the State Governments to rationalise the Taxation of the Petroleum products.

d) Issue an appropriate WRIT or an Order directing the Union of India to consider a scheme for presenting an Oil Budget in the Parliament.

e) Issue an appropriate WRIT or an Order directing Union of India to consider a scheme for reducing the volume of sale of Diesel driven motor vehicles in India to curb pollution.

f) Issue an appropriate WRIT or an Order directing an appropriate Committee/Investigation Agency to investigate conspiracy behind the present policy of the Government in de-regularising the pricing mechanism of the oil products.

Main Grounds are as follows

A. India is not matured to allow the Oil marketing companies to set the price of the Oil products as their own since any change in the price of Oil market will reflect and affect the Indian economy. On 25.06.2010 the Central Government decided to decontrol the prices of petrol as part of a plan to move towards a market-determined price regime. Prices of petrol will be hiked by Rs 3.50 per litre, diesel by Rs 2 per litre and kerosene by Rs 3 per litre. Cooking gas will be costlier by Rs 35 per cylinder. The move triggered instant movement in the oil stocks. Shares of Indian Oil Corporation Ltd, the country’s biggest refiner, rose 7.3 per cent in Mumbai trading, while Bharat Petroleum Corporation Ltd gained 7.9 per cent and Hindustan Petroleum Corporation was up 11 per cent, on a day the benchmark Sensex fell 0.6 per cent. It is submitted that Oil Industry contribute the 6.7% GDP of India and the Industry is being controlled mainly by the 3 Public Sector Oil Marketing Companies. Such companies shall not be allowed to control the market and the monopoly of the three public sector oil companies in setting the price of petroleum products will badly affect the economic interest of the Nation.

B. Directive Principles of State Policy, enshrined in Part IV of the Indian Constitutionreflects that India is a welfare state. A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those unable to avail themselves of the minimal provisions for a good life. The welfare state involves a direct transfer of funds from the state, to the services provided (i.e. healthcare, education) as well as directly to individuals ("benefits"). The welfare state is funded throughredistributionist taxation and has been referred to as a type of "mixed economy". the present policy of the government will sabotage the spirit of the Constitution and will lead to the complete eradication of the concept of the “welfare state” thereby increasing inflation which cannot be tolerated by an ordinary citizen of this Country.

C. Preamble of the Constitution of India enshrined that India is a socialist Country. A socialist state (or socialist republic) generally refers to any state that is constitutionally dedicated to the development of a socialist society. It is closely related to the political strategy ofstate socialism, an ideology that strives to build a socialist economy through Government policy. Therefore our constitution mandates that the Government shall constitutionally bound to an eventual transition to socialism. Present policy of the Government of India will lead to sabotage the concept of Socialism enshrined in the Constitution.

D. Standing Committee of Parliament on Petroleum and Natural gas with Sri.N.Janardhana Reddy as its chairman had examined the Oil pricing in India and submitted its report on ‘Marketing, Supply, Distribution, Dealerships and Pricing of Kerosene and other Petroleum Products’ recommending that taxation on oil products shall be rationalised. These important recommendations have not at all seen light and were not considered by the Government.

E. Expert Group headed by Sri. Kirit had not considered the entire terms of reference, but confined only to the pricing mechanism of the Oil Products. It is submitted that the Reference was specifically made for the purpose of rationalisation of the Taxation system of the Petroleum products in the country. But the Expert Group submitted in the Report that it was not necessary to consider it at this stage. Taxation of the Petroleum products is inseparable part of the pricing of the Petroleum products in India.

F. Conceivably, the three companies with a nod and a wink from the government can now set the price of petrol in such a way as per their conclusion. It is submitted that the Executives of three top companies that, India’s leading public sector oil companies i.e. Indian Oil, Hindustan Petroleum and Bharat Petroleum the Respondents herein, who hold monopoly control over the market, declared after a meeting with Petroleum Secretary S. Sundareshan that they would set a common price. This is price fixing and abuse of dominant position, which shall be prohibited. The attempt of the Public Sector Oil Marketing Companies to avoid competition abusing dominant position which will badly affect the Indian economy.

G. There is no point in claiming that the Import Parity Pricing System is necessary to stabilize the oil price in the domestic market and to reduce the loss of oil companies. It is submitted that the public sector Oil Marketing Companies are consistently providing dividend to the Government. It is contradictory to say that the Companies are making losses and disbursing dividend to the Government. It is irrational in saying that the public shall suffer the losses incurred by the public sector Oil Marketing Companies for which clear information/report is not available, whether the Oil Marketing Companies are really making profit or loss?

H. The other impact of the present de-regulation is that the People are switching over to the Diesel driven vehicles in order to avoid high cost of the Petrol driven vehicles, which is causing further pollution in the environment thereby contributing much damage, which is being unnoticed by the Government and a scheme shall be framed by the Union of India.

I. It is submitted that with the dismantling of APM, the price of indigenous crude has been linked to international prices, which implies that the price received by domestic crude oil producers are linked to international prices as against the pooled price in the APM regime which was the weighted average of international prices and the domestic cost. In effect at the time of dismantling of the APM, domestic refineries were to pay international crude prices even for crude procured from domestic producers. Revenues of domestic crude producers, on the other hand, are over and above what would have been on the basis of their costs.

J. There was a conspiracy behind the present policy of the Government in de-regularising the price mechanism which shall be enquired into. Recently wikileaks revealed that the elevation of Sri. Murali Deora as Petroleum Minister was the interest of the US Government. (The new item was published by various medias on 15.03.2011)

K. The Petitioner organisation doubts that there was a conspiracy behind the de-regularisation of the oil price mechanism in order to sabotage the Indian economy with the vested interest. It is submitted that an Independent Committee appointed by the this Hon’ble Court shall be directed to investigate the implementation of the IPP with respect to the Oil Prices of the domestic product and the product being exported by the OMC’s.

L. It is pertinent to mention here that the higher costs of the Petroleum products are not only due to the increase in the crude oil price in International market, but also due to the existing tax system in India.

Now we are putting the respective value of each element.

Base Price	Rs 24.23
Excise Duty	Rs. 14.35
Education Cess	Rs. 0.43
Dealer’s Commission	Rs. 1.05
Cost of Refining	Rs. 0.52
Capital cost of Refinery absorbed	Rs. 6.00
VAT	Rs. 5.50
Custom Duty on Crude Oil	Rs. 1.10
Custom Duty on Petrol	Rs. 1.54
Transportation charges	Rs. 6.00
TOTAL (on August 24, 2011)	Rs 60.72

Recent Petrol prices in some major countries (Rs per Liter)

India	Rs. 67.71
China	Rs. 47.50
USA	Rs. 43.70
Pakistan	Rs. 43.29
Russia	Rs. 41.96
Malaysia	Rs. 26.78
Venezuela	Rs. 00.71

Per Capita GDP of the above Nations are as follows

India	$ 3,608.196
China	$ 8,288.818
USA	$ 48,665.805
Pakistan	$ 2,851.056
Russia	$ 16,840.802
Malaysia	$ 15,384.563
Venezuela	$ 11,930.862

It is submitted that the Per-capita GDP of India is very low comparing to the other major oil consuming Countries. It is submitted that India is the only Nation where the prices of the oil products are remaining at a higher rate even though the price is controllable by the Government and average cost of Petrol per citizen is very high comparing to other countries.

There is no transparency in the pricing mechanism in the Oil sector. It is submitted that Rs.2500.00 per Tonne is collected as cess under the Oil Industry (Development) Act, 1974. So far Rs.55, 966.81 Crore has been collected by the Government from the date of promulgation of the Act, whereas only Rs. 902.40 Crore has been allotted to the Oil Development Board. a Parliamentary Committee has recommended that the amount shall be utilized for the meeting the loss due to the increase in international Oil Price. But such proposal was so far not considered by the Government. It is submitted that in advertisement published by the Petroleum Ministry says that the Government is suffering a loss of Rs. 53,000.00 Crore Per year even after the hike of the Petroleum prices. On the Other hand the Oil Companies have contributed 90.000.00 Crore during the same period and it is expected that they will contribute 1, 20,000.00 this year.

M. An Oil Budget like Railway Budget is necessary for the country and it shall be presented by the Government in the Parliament to control the anarchism in the field. Even though the Parliament is appropriating the bills for the taxation of the petroleum products, that does not ensure the consistent oil price for that year. Oil Industry in the Country is contributing 6.7% of the Gross Domestic Products (GDP) of India. An item which contributes 6.7% of the GDP may not be allowed to be freely handled in the Country without the control of the Government.

We also demand for prohibition of promotional advertisements by the Public sector Oil companies.

P. Sandosh Kumar

General Secretary,

All India Youth Federation

Mob: 9971086279