To
Smt Nirmala Sitharaman
Union Finance Minister
Dear Smt Sitharaman,
I have just come across a news report (https://economictimes.indiatimes.com/industry/energy/oil-gas/india-cuts-windfall-tax-on-petroleum-crude-to-zero/articleshow/100259244.cms) that the Ministry has cut the windfall tax on domestic crude oil to zero. I am not sure whether this will imply any corresponding relief to domestic consumers of petroleum products.
On the other hand, why is the government shy of imposing a windfall tax on private oil refiners who are earning huge profits from discounted Russian crude imports?
I refer to the steep increase in the import of Crude oil from Russia at discounted prices following the Ukraine war and the fact that it is two private oil refining companies, namely, Reliance and Nayara, that seem to have earned windfall profits, without passing on any significant benefit to the domestic consumers.
According to reports (https://theprint.in/opinion/who-in-india-is-profitting-from-russian-oil-not-the-common-man-but-private-companies/1248999/ & https://economictimes.indiatimes.com/industry/energy/oil-gas/indian-private-refiners-profit-from-cheap-russian-crude-as-state-refiners-suffer/articleshow/91935534.cms?from=mdr), almost 70% of the Russian crude was cornered by these two private refiners, valuing more than $20 billion, who instead of passing on a corresponding price benefit to the domestic consumers, chose to reduce domestic sales and export refined products to European and other destinations. Even considering the export duties levied by the government on oil products, I understand that the profit margins earned by the two private refiners are unconscionably high.
On the other hand, it is the three public sector oil companies, namely, IOC, Bharat Petroleum Corporation and HPCL that, as usual, met 90% of the domestic demand for critical oil products such as diesel, kerosene, motor spirit (petrol) etc., the prices of which directly impacted domestic consumers of petroleum products and, in turn, generated inflationary trends in the economy.
Should not the Ministries of Petroleum & Natural Gas and the Finance Ministry take direct responsibility for allowing private refiners to profiteer at the cost of the domestic consumers?
There seems to be yet another somewhat dubious dimension to the import of Russian crude by India and its re-export to Western countries in the form of refined products.
In this connection, I invite your attention to a detailed investigative report that recently appeared in Financial Times (https://www.ft.com/content/6f81585c-321a-41fb-bcdb-579e93381671), corroborated by other reports (https://russianfreepress.com/2023/05/04/ft-finds-unknown-oil-giant-linked-to-igor-sechin-in-india/).
It appears that an Indian intermediary private shipping company set up very recently, has shipped at least 83 mn barrels of Russian crude and oil products reprocessed from it, between Russian ports and the above-cited private refiners. The company acquired at least 56 vessels since March 2022, including 13 in December alone. The phenomenal surge in the volume of shipping undertaken by that company ought to have caused concern to the government. Are not the Ministry of Shipping and the Ministry of Corporate Affairs aware of this?
Following the Ukraine war, India steeply increased its crude oil imports from Russia, which came at a heavy discount. One would have expected the government to ensure that the three public-sector oil companies take advantage of it and pass on a corresponding price benefit to domestic consumers. For reasons best known to the government, it instead allowed two Gujarat-based private oil refining companies to process the Russian crude, cut down the sale of the downstream petroleum products to domestic consumers and, instead, export the refined products to the West, which permitted them to earn huge profits, despite the nominal export duties levied by the government. As if this was not enough, the government tacitly allowed a private shipping company to emerge from nowhere, acquire a huge fleet of vessels overnight and provide logistic support to Russian crude imports by the Indian private refiners and re-export of the processed oil products to the West.
I am sure that the concerned Central ministries, namely, the Ministry of Petroleum & Natural Gas, the Ministry of Shipping, the Ministry of External Affairs, the Finance Ministry and the Corporate Affairs Ministry, were all fully aware of what was happening.
From the domestic oil consumer’s point of view and from the point of view of the public at large, this certainly calls for an independent enquiry, especially on how a few private oil refining and shipping companies were allowed to profiteer at the cost of the domestic consumers. Is this part of Niti Ayog’s “grand vision” of “creating and nurturing (private) global champions” (https://www.niti.gov.in/battling-barrier-scale)?
Is it not ironic that the government should weaken and sell valuable CPSEs to private companies on the one hand and, on the other hand, subsidise private companies through its questionable PLI scheme and allow private oil refiners to profiteer at the expense of the CPSE refining companies and, of course, the public at large?
Regards,
Yours sincerely,
E A S sarma
Former Secretary to the Government of India
Visakhapatnam
