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Petroleum pricing reform

Rohit - June 30, 2010

Petroleum Secretary S Sundareshan, while addressing a press Conference on Friday, announced the government’s decision to deregulate prices of petrol. Petrol prices shall now be subject to periodic revisions based on fluctuations in market prices. An immediate hike of Rs. 3.50 per litre has already been affected. Prices of diesel shall be deregulated in stages while those of kerosene and LPG shall continue to be regulated by the government. For the moment, diesel has been hiked by Rs. 2 per litre, kerosene by Rs. 3 per litre and LPG by Rs. 35 per cylinder. Crude to retail: Pricing and under-recoveries India imports about 80% of its crude oil requirement.  Therefore, the cost of petroleum products in India is linked to international prices. The Indian barrel of crude cost $78 in March 2010. Once crude is refined, it is ready for retail. This retail product, is then taxed by the government (both Centre and State) before it is sold to consumers. Taxes are levied primarily for two reasons: to discourage consumption and as a source of revenue. Taxes in India are in line with several developed nations, with the notable exception of the US (See Note 1) Before the current hike, taxes and duties in Delhi accounted for around 48% of the retail price of petrol and 24% of the retail price of diesel. (Click Here for details) Ideally, the retail prices of petroleum products should then be determined as: Retail prices = Cost of production + taxes + profit margins However, in practice, the government indicates the price at which PSU oil companies sell petroleum products. Since these oil companies cannot control the cost of crude (the primary driver of the cost of production) or the taxes, the net result is an effect on their profit margins. In cases where the cost of production and taxes exceeds the prescribed retail price, the profit margins become negative. These negative profit margins are called ‘under-recoveries’. When international crude prices rose above $130 in 2008, under-recoveries reached an all-time high of Rs. 103,292 crore. Even at much lower prices in 2009-10 (averaging at $70 per barrel), under-recoveries totalled Rs. 46,051 crore. (See Note 2) The latest move is an effort to reduce these under-recoveries. The government cited the recommendations of the Kirit Parkih Committee while announcing its decision (Summary - Kirit Parikh Committee report). Any alternatives to price hike? As is evident from above, under-recoveries can also be reduced by decreasing taxes. In fact, one might argue that by both taxing the product and offering a subsidy, the government is complicating the situation. Usually whenever subsidization coexists with taxation, it serves the purpose of redistribution. For example, taxes might be collected universally but subsidy be granted to the weaker sections only. However, this is not the case in the current situation. What needs to be noted here is that these taxes are a very significant source of revenue. In fact, the total taxes paid by the oil sector to the central and state governments were around 3% of GDP in 2008-09 (See Note 3). Reducing taxes now might make it difficult for successive governments to raise taxation rates on petroleum products again. Moreover, though taxes are levied both by the Centre and the States, the subsidy is borne only by the Centre. Hence, the current arrangement is beneficial to the States. Possible future scenarios The opposition has voiced concerns that the hike in prices is likely to lead to even higher inflation and will further burden the consumer. The Chief Economic Advisor to the Finance Ministry, Dr. Kaushik Basu, however, told the media that these changes would have a beneficial effect on the economy. According to him,

"The (decontrol of petrol prices), coupled with price increase for LPG (cooking gas) and kerosene, will have an immediate positive impact on inflation. I expect an increase of 0.9 percentage points in the monthly Wholesale Price Index (WPI) inflation".

 

However, he added, that since the hike in fuel prices would push down fiscal and revenue deficit,

"they will exert a downward pressure on prices… More importantly, from now on, if there is a global shortage and the international price of crude rises, this signal will be transmitted to the Indian consumer. It will rationalise the way we spend money, the kinds and amount of energy we use, and the cars we manufacture. It is an important step in making India a more efficient, global player”.

It remains to be seen how the actual situation pans out. Notes 1) Share of tax in retail price (%)

Country Petrol Diesel
France 61% 46%
Germany 63% 47%
Italy 59% 43%
Spain 52% 38%
UK 64% 57%
Japan 48% 34%
Canada 32% 25%
USA 14% 16%
India (Del) 48% 24%

Source:  Petroleum Planning and Analysis Cell, PRS (Data as of Feb, 2010) 2) Under-recoveries by oil companies (Rs Crore)

Year Petrol Diesel PDS Kerosene Domestic LPG Total
2004-05 150 2,154 9,480 8,362 20,146
2005-06 2,723 12,647 14,384 10,246 40,000
2006-07 2,027 18,776 17,883 10,701 49,387
2007-08 7,332 35,166 19,102 15,523 77,123
2008-09 5,181 52,286 28,225 17,600 103,292
2008-09 5,151 9,279 17,364 14,257 46,051

Source:  Petroleum Planning and Analysis Cell, PRS 3) Contribution to Central and State taxes by Oil Sector (2008-09)

Category Rs (crore)
Sales tax 63,349
Excise duty 60,875
Corporate tax 12,031
Customs duty 6,299
Others (Centre) 5,093
Other (State) 4,937
Profit petroleum 4,710
Dividend 4,504
Total 1,61,798

Source:  Petroleum Planning and Analysis Cell

Constitution

Explainer: Mechanisms to investigate charges against a Supreme Court judge

Roshni Sinha - April 25, 2019

This week, an in-house inquiry committee was constituted to consider a complaint against the current Chief Justice of India.  Over the years, three mechanisms have evolved to investigate cases of misconduct, including cases of sexual harassment, misbehaviour or incapacity against judges.  In this blog, we summarise the procedure for investigating such charges against judges of the Supreme Court.  

  • In-house procedure (1999): The Supreme Court has an in-house process to deal with allegations against a judge relating to the discharge of his judicial function, or with regard to his conduct or behaviour outside court.   
  • Sexual harassment guidelines: In 2013, Parliament passed the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.  Subsequently, the Supreme Court framed regulations for protection of women against sexual harassment in the Supreme Court. Under the regulations, the CJI is required to constitute a Gender Sensitisation and Internal Complaints Committee (GSICC).  The GSICC will include 7-13 members including: (i) one or two judges of the Supreme Court, and (ii) up to two outside members (having experience in social justice, women empowerment, gender justice, among others) to be nominated by the CJI.  The Regulations require the majority of the members of GSICC to be women.  As of 2018, the GSICC has received 13 complaints, out of which 10 have been disposed of. 
  • Removal for proven misbehaviour or incapacity: Charges of misconduct may also be investigated in the context of proceedings for removal of a judge.  Article 124(4) of the Constitution of India provides that a judge can be removed only by Parliament on the basis of a motion in either the Lok Sabha or Rajya Sabha.  The procedure for removal of judges is elaborated in the Judges Inquiry Act, 1968.  Till date, no judge of the higher judiciary has been impeached under this process. 

Table 1: Process for investigation of charges against a Supreme Court judge

 

In-house Procedure of Supreme Court

2013 SC Sexual Harassment Regulation

Removal Proceedings

Who may file a complaint
  • Complaint of misconduct may be filed by any person.
  • Written complaint of sexual harassment by a woman.
  • Signed notice by at least 100 members of the Lok Sabha, or 50 members of the Rajya Sabha on charges of misbehaviour or incapacity by a judge. 

Persons to whom complaint must be filed
  • CJI or President of India
  • GSICC
  • Presiding Officer of the relevant House of Parliament

Preliminary Inquiry
  • The CJI is required to determine whether the complaint is either frivolous or serious. If the complaint is frivolous or relates to a pending case, no further action will be taken.
  • If the CJI finds that the complaint involves serious misconduct or impropriety, he will seek the response of the concerned Judge. 
  • Based on the response and supporting materials, if the CJI finds that the complaint needs a deeper probe, he will constitute an inquiry committee. 
  • If the GSICC is satisfied that the complaint is genuine, it will constitute a three-member Internal Sub-Committee to conduct an inquiry into the complaint. 
  • If the notice is in order, the Presiding Officer will constitute a three-member committee to investigate the complaint.

Composition of Inquiry Committee

  • The Committee will comprise three judges including a Judge of the Supreme Court and two Chief Justices of other High Courts.
  • The Committee will comprise members of the GSICC or persons nominated by the GSICC, with majority members being a woman and an outside member.
  • The committee will comprise a Supreme Court judge, Chief Justice of a High Court, and a distinguished jurist. 

Time limit for submission of inquiry report

  • No specific time limit provided.
  • To be completed within 90 days of the constitution of the Internal Sub-Committee, and forwarded to the GSICC within 10 days of completion. 
  • To be submitted to the presiding officer within 90 days.

Findings of the Committee
  • The Committee may report to the CJI that:

​1.  there is no substance in the allegation made, or,

2.  there is substance in the allegations but the misconduct is not of such serious nature as to warrant removal, or,

3.  the misconduct is serious enough to initiate removal proceedings against the judge. 
  • If the committee concludes that the allegation has been proved, it will submit its report to the GSICC to pass appropriate orders within 45 days.
  • If more than two thirds of the GSICC members differ from the conclusion of the Committee, it will, after hearing the complainant and the accused, record its reasons for differing and pass orders.
  • After concluding its investigation, the Committee will submit its report to the presiding officer, who will lay the report before the relevant House.

 

Action taken upon submission of report

  • If the finding is under category (2) above, the CJI may call and advise the Judge accordingly and direct that the report be placed on record.
  • If the finding is under category (3) above, the CJI may ask the judge to resign or seek voluntary retirement.  If the judge refuses to resign, the CJI may decide to not allocate any judicial work to the judge concerned. 
  •  Further, the CJI may inform the President of India and the Prime Minister of his reasons for the action taken and forward a copy of the inquiry report to them.
  • The GSICC has the power to: (i) to pass an order of admonition (reprimand), which may also be published in the court precinct, or (ii) pass an order to prohibit the accused from harassing or communicating with the complainant, or (iii) pass any other order to end the sexual harassment faced by the complainant.
  • GSICC may also recommend to the CJI to pass orders against the accused, including: (i) prohibiting entry of the accused into the Supreme Court for up to a year, or (ii) filing a criminal complaint before the concerned disciplinary authority governing the accused.
  • If the report records a finding of misbehaviour or incapacity, the motion for removal will be taken up for consideration and debated. 
  • The motion is required to be adopted by each House by a majority of the total membership of that House and a majority of at least two-thirds of the members of that House present and voting.
  • Once the motion is adopted in both Houses, it is sent to the President, who will issue an order for the removal of the judge.

Process for Appeals
  • No specific provision.
  • Any aggrieved person may make a representation to the CJI to set aside/modify the orders passed by the GSICC.  The CJI also has the power to issue any other orders in order to secure justice to the victim.
  • No specific provision.

Sources: Report of the Committee on In-House Procedure, December 1999, Supreme Court of India; Gender Sensitisation and Sexual Harassment of Women at the Supreme Court of India (Prevention, Prohibition and Redressal) Regulations, 2013; Article 124(4), Constitution of India; Judges Inquiry Act, 1968 read with the Judges Inquiry Rules, 1969; PRS.

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