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Sector Focus : Refining

Refining industry: Post-budget

Refining: State of the industry (2000-01)

Crude oil and petroleum products: Tariffs, prices and landed costs

	Tariffs (per cent)				Prices (Jan 2001)		Landed costs (Rs/tonne)
	Customs		Excise		Domestic	Intnl	Pre- budget	Post budget
	00-01	01-02	00-01	01-02	(Rs/ton)	($/ton)
Motor spirit(MS)1	20.0	20.0	16.0	32.0	18,999	184	11,014	11,014
Aviation turbine fuel(ATF)1	20.0	20.0	16.0	16.0	14,759	189	11,287	11,287
Naphtha	5.0	5.0	16.0	16.0	11,260	259	12,945	12,945
Superior kerosene oil (SKO)1
- Industrial use	-	-	8.0	8.0	13,590	-	-	-
- Domestic use	0.0	5.0	8.0	8.0	6,110	182	9,107	9,562
High speed diesel (HSD)1	20.0	20.0	12.0	16.0	11,935	178	10,684	10,684
Fuel oil1	20.0	20.0	16.0	16.0	6,790	164	5,597	5,597
Liquified petroleum gas
- Industrial use	10.0	20.0	8.0	8.0	21,485	335	19,881	21,689
- Domestic use	10.0	20.0	8.0	8.0	12,427	-	-	-
Bitumen	20.0	20.0	16.0	16.0	11,155	n.a.	n.a.	n.a.
Crude oil	10.0	10.0	0.0	0.0	5,570	181	9,711	9,711

n.a.: Not available
1 Price per kl

Notes:

1) In 2000-01, duties on the products and crude oil are with effect from October 2000.
2) International prices are fob prices, except for naphtha.
3) Customs duty on SKO for parallel marketers is 35 per cent in 2000-01.
4) Excise duty of 8 per cent is applicable on compressed natural gas (CNG) in 2001-02.

Source: CRIS INFAC

• Consumption growth of petroleum products is expected to be lower at 2 per cent, as compared with that in 1999-2000, due to an expected slow-down in the manufacturing sector. Consumption of diesel, which accounts for 41 per cent of the total consumption of petroleum products, is expected to decline by 1 per cent.
• Supply of petroleum products is expected to increase by 24 per cent.
• On September 30, 2000, prices of controlled products were increased. On November 21, 2000, prices of two of the controlled products (LPG and SKO) were partially rolled back.
• Margins of refineries are expected to increase as compared with those in 1999-2000.

Refining: Budget impact

Impact factors

Company name	Impact	Impact factors
BPCL	Pos	A,B,C
(168.15, 175.95)
HPCL	Pos	A,B,C
(175.10, 176.80)
IBP Company Ltd	Pos	A,C
(316.90, 330.85)
IOC	Pos	A,B,C
(167.85, 168.20)
Kochi Refineries	Pos	A,B,C
(51.70, 52.50)
MRPL	Neut	A,B
(8.70, 8.35)
ONGC	Pos	A,C
(142.90, 141.25)
RPL	Pos	A,B,C
(60.50, 61.85)

Note:
Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.
pos= positive neg= negative neut= neutral

Source: CRIS INFAC

A: The increase in the excise duty on MS and HSD would result in an increase in the oil pool deficit, since consumer prices have not been increased. This would have a marginally negative impact on the players, since receivables from the oil pool account would increase. APM is to be dismantled by April 2002, as per the scheduled programme announced in 1997.

B: The increase in the customs duty on LPG and SKO is expected to result in an increase in the margins of the refineries. IBP, which is a stand-alone marketing company, would not benefit from the increase in the customs duty.

C: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a significant positive impact on oil companies (with the exception of MRPL), due to their relatively large tax outflows.

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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