The great petrol boondongle

Recently India has been abuzz with how the Oil Marketing companies are making huge losses and petrol prices need to be revised. I say hogwash. Lets look at petrol prices in USA a country which gives no subsidies on gas and has both federal and state government taxes. Gasoline (petrol as we call it in India) is 4 dollars a gallon. A gallon is 3.785 litres so its roughly 1.05 dollars a liter which works out to 44 Rupees a litre at 42 rupees to a dollar. So if gas with no subsidies can sell at 44 rupees in USA why does it need to be sold at 71 rupees (according to our great oil minister) to break even for the Oil Marketing companies. Just how inefficient are our OMCs? Actually Oil should cost even lesser in India than in USA for a variety of reasons. Firstly we are closer to the middle east so we spend less on hauling the crude here. Secondly we have much more modern refineries than the US which hasnt built a new refinery in 30 years. Our refineries can process Sour Crude (high sulfur crude) which is 10-15$ cheaper per barrel than the sweet crude price the government keeps talking about. Thirdly our environment standards are much lower than the US so our refiners can refine the oil much more cheaply. Fifthly we have cheap labor and thus our refiners run much cheaper. In fact India is one of the largest exporters of refined oil products - petrol and diesel in the region. Also with prices cheaper than us the US government uses their gas taxes to provide 6 lane elevated super highways with no toll. Just what do we get for our gas taxes? Any decent road is tolled (Roads within cities are paid through municipal taxes so are a separate issue). So just why is our gas price so high? Lets look at taxes. The Us imposes a federal 15 cent tax for building highways and various states impose a state tax which averages to 21 cent a gallon. So without taxes a US gallon is 3.74 dollars a gallon working out to 42 rupees a liter and the taxes are 2 rupees a liter. Now lets look at how much tax our Indian government imposes The central government imposes 14 rupees of Excise. The State Government impose 13 rupees of sales tax. This is before the highway building cess whish is just 60 paise a liter. So this means the Oil companies get around 23 rupees out of 50 rupees so they have a loss of around 10 rupees per liter (not 19 rupees as Indian petrol's production costs are roughly 33 rupees a liter not 42 for the reasons given above) So the OMCs are making a 10 rupee loss but the OMCs are owned by the central government so they take 14 rupees excise and pay 10 rupees of that to the Oil marketing companies as subsidy and are still left with 4 rupees profit. But the real culprits here are the state governments who do not give us anything in return for the 13 rupees they collect as excise. Thus all this moaning and groaning from the OMCs about underrecoveries is just bull. And the moaning and groaning from the state governments is even worse its hypocritic bull.