Dec. 24 – Planning to ease the subsidy burden on Indian oil companies, the Oil Ministry said it is in the process of formulating a system to offset losses incurred by state oil companies.
Reuters sources say the paper which is expected to be released in mid January is likely to limit the subsidy share between crude oil firms and oil refinery companies to 300 billion rupees (US$6.40 billion) for the current financial year ending March 2009. Meanwhile the government has also told upstream Indian oil companies ONGC and Oil India Ltd not to extend any discounts to public sector oil marketing companies (OMCs) – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – on the sale of crude oil, effective from December.
The upstream companies extend discounts on crude oil and petroleum products sold to the refiners so that they can pass on the subsidy to the public. Sources told the Hindu Business Line that untill the third week of November, the upstream companies had already shouldered a subsidy burden of Rs 30,200 crore (US$6.5 billion) as they were forced to supply crude at discounts of up to US$70 a barrel when crude oil was above US$100 a barrel last summer.
Due to subsidies offered by the governenment, Indian state refiners suffered a combined losses of 144.3 billion rupees (US$3 billion) during the first half of this financial year. The projected annual revenue losses of the oil firms on fuel sales have declined to about 1.10 trillion rupees (US$23 billion), from over 2.4 trillion rupees (US$51 billion) estimated in June, when global crude oil prices were over US$100 a barrel, Reuters reported.
Mostly I’d agree with that. The US is around 14-16m vehicles, China will come in around 10m this year and surpass the US most likely by 2011-2012. But keep in mind that the 16m is the market, not the build, where only about 10m are actually made in the US.
With that said, India will certainly continue at a high growth rate, in which it could only be accelerated if the infrastructure has a push behind it. I still think that once technology catches up in China and India the majority of the supply base will be positioned to serve its domestic customers as their primary objective. The US labor situation will start to eat humble pie eventually and combined with a strengthening dollar making most parts in the US can still make sense. Again, only if they lose all their legacy issues of today.
I know little about India, but from what I do know, they are only limited by the infrastructure focus and a stable place to live and do business in the eyes of incoming global capital.