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Over the last few days, the retail prices of petrol and diesel have touched an all-time high.  In Delhi, petrol was selling at 74.6/litre on April 25, 2018, while diesel was at 66/litre.

Petroleum products are used as raw materials in various sectors and industries such as transport and petrochemicals.  These products may also be used in factories to operate machinery or generators.  Any fluctuation in the price of petrol and diesel impacts the production and transport costs of various items.  When compared to other neighbouring countries, India has the highest prices for petrol and diesel.

Note: Prices as on April 1, 2018. Prices for India pertain to Delhi. Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.

Note: Prices as on April 1, 2018. Prices for India pertain to Delhi.
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.

How is the price of petrol and diesel fixed?

Historically, the price of petrol and diesel in India was regulated, i.e. the government was involved in the deciding the retail price.  The government deregulated the pricing of petrol in 2010 and diesel in 2014.  This allowed oil marketing companies to determine the price of these products, and revise them every fortnight.

Starting June 16, 2017, prices for petrol and diesel are revised on a daily basis.  This was done to with the idea that daily revision will reduce the volatility in retail prices, and protect the consumer against sharp fluctuations.  The break-up of retail prices of petrol and diesel in Delhi on April 25, 2018 can be found below.  As seen in the table, over 50% of the retail price of petrol comprises central and states taxes and the dealer’s commission.  In case of diesel, this amount is close to 40%.

Table 1: Break-up of petrol and diesel prices in Delhi (on April 25, 2018)

Component

Petrol

Diesel

Rs/litre % of retail price Rs/litre

% of retail price

Price Charged to Dealers 35.7 48% 38.4 58%
Excise Duty (levied by centre) 19.5 26% 15.3 23%
Dealer Commission 3.6 5% 2.5 4%
VAT (levied by state) 15.9 21% 9.7 15%
Retail Price 74.6 100% 65.9 100%
Source: Price Build-up of Petrol and Diesel at Delhi effective April 25, 2018; Indian Oil Corporation Limited.

 

Does India produce enough petroleum to support domestic consumption?

India imports 84% of the petroleum products consumed in the country.  This implies that any change in the global prices of crude oil has a significant impact on the domestic price of petroleum products.  In 2000-01, net import of petroleum products constituted 75% of the total consumption in the country.  This increased to 95% in 2016-17.  The figure below shows the amount of petroleum products consumed in the country, and the share of imports.

Note: Production is the difference between the total consumption in the country and the net imports. Sources: Petroleum Planning and Analysis Cell; PRS.

Note: Production is the difference between the total consumption in the country and the net imports.
Sources: Petroleum Planning and Analysis Cell; PRS.

What has been the global trend in crude oil prices? How has this impacted prices in India?

Over the last five years, the global price of crude oil (Indian basket) has come down from USD 110 in January 2013 to USD 64 in March 2018, having touched a low of USD 28 in January 2016.

While there has been a 42% drop in the price of global crude over this five-period, the retail price of petrol in India has increased by 8%.  During this period, the retail price of diesel increased by 33%.  The two figures below show the trend in prices of global crude oil and retail price of petrol and diesel in India, over the last five years.

Petrol price

Diesel price

 

Note: Subsidy indicated in the graphs is notional.  While calculating the subsidy amount, other factors such as cost of domestic inputs will also have to be accounted.  Global Crude Oil Price is for the Indian basket.  Figures reflect average monthly retail price of petrol and diesel in Delhi.
Sources: Petroleum Planning and Analysis Cell; Indian Oil Corporation Limited; PRS.

 

How has the excise duty on petrol and diesel changed over the last few years?

Under the Constitution, the central government has the powers to tax the production of petroleum products, while states have the power to tax their sale.  Petroleum has been kept outside the purview of the Goods and Services Tax (GST), till the GST Council decides.

Over the years, the central government has used taxes to prevent sharp fluctuations in the retail price of diesel and petrol.  In the past, when global crude oil prices have increased, duties have been cut.  Since 2014, as global crude oil prices declined, excise duties have been increased.

Sources: Petroleum Planning and Analysis Cell; PRS.

Sources: Petroleum Planning and Analysis Cell; PRS.

 

As a consequence of the increase in duties, the central government’s revenue from excise on petrol and diesel increased annually at a rate of 46% between 2013-14 and 2016-17.  During the same period, the total sales tax collections of states (from petrol and diesel) increased annually by 9%.  The figure below shows the trend in overall collections of the central and state governments from petroleum (including receipts from taxes, royalties, and dividends).

 

Notes: Data includes tax collections (from cesses, royalties, customs duty, central excise duty, state sales tax, octroi, and entry tax, among others), dividends paid to the government, and profit on oil exploration. Data sources: Petroleum and Planning Analysis Cell; Central Board of Excise and Customs; Indian Oil Corporation Limited; PRS.

Notes: Data includes tax collections (from cesses, royalties, customs duty, central excise duty, state sales tax, octroi, and entry tax, among others), dividends paid to the government, and profit on oil exploration.
Data sources: Petroleum and Planning Analysis Cell; Central Board of Excise and Customs; Indian Oil Corporation Limited; PRS.

Recently, there have been multiple Naxal attacks on CRPF personnel in Chhattisgarh.  Parliamentary Committees have previously examined the working of the Central Armed Police Forces (CAPFs).  In this context, we examine issues related to functioning of these Forces and recommendations made to address them.

What is the role of the Central Armed Police Forces (CAPFs)?

Under the Constitution, police and public order are state subjects.  However, the Ministry of Home Affairs (MHA) assists state governments by providing them support of the Central Armed Police Forces.  The Ministry maintains seven CAPFs: (i) the Central Reserve Police Force, which assists in internal security and counterinsurgency, (ii) the Central Industrial Security Force, which protects vital installations (like airports) and public sector undertakings, (iii) the National Security Guards, which is a special counterterrorism force, and (iv) four border guarding forces, which are the Border Security Force, Indo-Tibetan Border Police, Sashastra Seema Bal, and Assam Rifles.

What is the sanctioned strength of CAPFs personnel compared to the actual strength?

As of January 2017, the sanctioned strength of the seven CAPFs was 10,78,514 personnel.  However, 15% of these posts (1,58,591 posts) were lying vacant.  Data from the Bureau of Police Research and Development shows that vacancies in the CAPFs have remained over the years.  Table 1 shows the level of vacancies in the seven CAPFs between 2012 and 2017. Nov 2The level of vacancies is different for various police forces.  For example, in 2017, the Sashastra Seema Bal had the highest level of vacancies at 57%.  On the other hand, the Border Security Force had 2% vacancies.  The Central Reserve Police Force, which account for 30% of the sanctioned strength of the seven CAPFs, had a vacancy of 8%.

How often are CAPFs deployed?

According to the Estimates Committee of Parliament, the number of deployment of CAPFs battalions has increased from 91 in 2012-13 to 119 in 2016-17.  The Committee has noted that there has been heavy dependence by states on central police forces even for day-to-day law and order issues.  This is likely to affect anti-insurgency and border-guarding operations of the Forces, as well as curtail their time for training.  The continuous deployment also leaves less time for rest and recuperation.

The Estimates Committee recommended that states must develop their own systems, and augment their police forces by providing adequate training and equipment.  It further recommended that the central government should supplement the efforts of state governments by providing financial assistance and other help for capacity building of their forces.

What is the financial allocation to CAPFs?

Under the Union Budget 2018-19, an allocation of Rs 62,741 crore was made to the seven CAPFs.  Of this, 32% (Rs 20,268 crore) has been allocated to the Central Reserve Police Forces.  The Estimates Committee has pointed out that most of the expenditure of the CAPFs was on salaries.  According to the Committee, the financial performance in case of outlays allocated for capacity augmentation has been very poor.  For example, under the Modernization Plan-II, Rs 11,009 crore was approved for the period 2012-17.  However, the allocation during the period 2013-16 was Rs 251 crore and the reported expenditure was Rs 198 crore.

What are the working conditions for CAPFs personnel?

The Standing Committee on Home Affairs in the year 2017 had expressed concern over the working conditions of personnel of the border guarding forces (Border Security Force, Assam Rifles, Indo-Tibetan Border Police, and Sashastra Seema Bal).  The Committee observed that they had to work 16-18 hours a day, with little time for rest or sleep.  The personnel were also not satisfied with medical facilities that had been provided at border locations.

In addition, the Standing Committee observed that personnel of the CAPFs have not been treated at par with the Armed Forces, in terms of pay and allowances.  The demand for Paramilitary Service Pay, similar to Military Service Pay, had not been agreed to by the Seventh Central Pay Commission.  Further, the Committee observed that the hard-area allowance for personnel of the border guarding forces was much lower as compared to members of the Armed Forces, despite being posted in areas with difficult terrain and harsh weather.

What is the status of training facilities and infrastructure available to CAPFs?

The Estimates Committee has noted that all CAPFs have set up training institutions to meet their training requirements and impart professional skills on specialised topics.  However, the Committee noted that there is an urgent need to upgrade the curriculum and infrastructure in these training institutes.  It recommended that while purchasing the latest equipment, training needs should also be taken care of, and if required, should be included in the purchase agreement itself.  Further, it recommended that the contents of training should be a mix of conventional matters as well as latest technologies such as IT, and cyber security.

According to the Estimates Committee, the MHA has been making efforts to provide modern arms, ammunition, and vehicles to the CAPFs.  In this regard, the Modernization Plan-II, for the period 2012-17, was approved by the Cabinet Committee on Security.  The Plan aims to provide financial support to CAPFs for modernisation in areas of arms, clothing, and equipment.

However, the Committee observed that the procurement process under the Plan was cumbersome and time consuming.  It recommended that the bottlenecks in procurement should be identified and corrective action should be taken.  It further suggested that the MHA and CAPFs should hold negotiations with ordnance factories and manufacturers in the public or private sector, to ensure an uninterrupted supply of equipment and other infrastructure.