Subsidies to Oil Corporations and the People of India

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I was watching the programme of Vijay TV,Neeya ,Naana’ Talk Show on 15 July 2012.

The topic was Price rise.

It brought out the apathetic conditions of the Middle and lower-income groups in India.

The topic touched on corporate subsidies.

However much the apologists for Corporates could argue the fact is that the subsidies doled out to the Corporates has not met with the desired social benefits in terms of controlling the prices.

The Economists quote growth rate of the Industry and the saving of Foreign Exchange.

Even if we agree to this, has it reduced the burden of the individuals?


I have collected, as a sample, the Dividend declared by IOC and the subsidies granted by the Government.

Simple logic says that no one would declare Dividend from a losing Company.

How is it that IOC is declaring profits and at the same time crying foul that it would be hurt badly if the Oil Prics are not increased?

As a major Share holder the Government is earning the profit out of IOC.

How can we say Oil Companies/Government is incurring loss on account of Oil Subsidy granted and to recoup it the Government is increasing th Oil Price?

Notwithstanding the mumbo-jumbo of Economics, the fact remains people suffer.

On the other hand a group is emerging,especially IT which fuels inflation.

This trend is not good for the Society.


The word ‘subsidy’ gets the hackles of free market economists up. The government’s economic managers and advisors have consistently been in favour of eliminating – or at least reducing — subsidies.

The present environment supports their argument. The economic slowdown has meant slower revenue growth and a larger than expected ‘fiscal deficit’ – the gap between the government’s income and expenditure – with pressure mounting to reign in the deficit. Numerous voices – from corporate chambers, financial media personalities, and even fund managers – have been calling on the government to reduce deficit by cutting down subsidies. With food inflation abating, the government strategy appears to be to utilise the period until March to build public acceptance of the elimination of subsidies and then make its moves after the state elections are out of the way.

The subsidies that the government wishes to cut or eliminate fund diverse programmes, with the common theme being that they make available some item of mass consumption – foodgrains, fuel or fertilisers – at prices controlled by the government rather than left to market forces.

The most elaborate subsidy is the food security programme with a Public Distribution System (PDS) that procures grain from farmers, maintains a buffer stock in storage, and makes the grain available around the year to 65 million households across the country through nearly half-a-million retail outlets. The oil programme has several components — providing kerosene (used mainly for lighting by poor families) through PDS outlets; distributing Liquefied Petroleum Gas (LPG) for cooking to 115 million customers; and finally making diesel – 75% of which is used for mass transport, both rail and road, for agricultural machinery and for emergency power generation – available at government set prices. The last programme pays fertiliser manufacturers and importers to sell fertilisers to farmers at government set prices.

Government support for these programmes has the effect of lowering the expenditure of poor households. This assumes importance in the absence of a state-supported guarantee of minimum income levels. Social security – a fallback in case of unemployment, old age and incapacitation or illness – is non-existent for most Indians. A recent report (Divided We Stand: Why Inequality Keeps Rising) from the Organisation of Economic Co-operation and Development (OECD) finds India’s public social spending measured as a fraction of its GDP not only far lower than the developed countries, but also lower than China, Russia, Brazil, and South Africa, the ‘emerging economies’ with which it is often compared.

Yet the government’s economic advisors choose to question the provision of subsidies.

Dividends Declared

Announcement Date Effective Date Dividend Type Dividend (%) Remarks
28/05/2012 Final 50%
30/05/2011 15/09/2011 Final 95%
28/05/2010 08/09/2010 Final 130%
29/05/2009 02/09/2009 Final 75%
28/05/2008 09/09/2008 Final 55% AGM
28/05/2007 10/09/2007 Final 130%
07/12/2006 26/12/2006 Interim 60%
26/05/2006 07/09/2006 Final 125% AGM
30/05/2005 08/09/2005 Final 100% AGM
07/12/2004 29/12/2004 Interim 45%
08/06/2004 23/08/2004 Final 160% AGM
11/12/2003 01/01/2004 Interim 50%
23/06/2003 18/09/2003 Final 160% AGM
02/01/2003 03/02/2003 Interim 50%
18/06/2002 12/09/2002 Final 110% AGM
15/06/2001 Final 95% AGM
05/08/2000 Final N.A.% Nil Final Dividend
15/05/2000 Interim 40% 2nd Interim Dividend
31/01/2000 Interim 35%
02/06/1999 Final 130%

Poverty Line-Jokers of Planning Commission-Rs.32/day?

I am providing ground figures for Essentials to live.

Rent. in the worst scenario, you can get Rs 800/month/ for a family of four.

Rent account Rs 25

Rice Rs 5 (186 gms at Rs 22 /kg))

Wheat Rs2(166 gms.(Rs.12/kg)

Vegetables Rs. 1.80(you get any of these-150gm Potatoes,90 gms onions,90 gms Tomatoes,180 gms of Pumpkin.

Cereals Rs1(20 gms) @ 50/kg.

MilkRsRs.2.30(85 ml) @ 27/liter.

Gas Rs 112(1.6 kgs)

This totals Rs.149.10.

No other expenses like Electricity, Transport,Education,Medicine, Provisions are included.

(  I have taken the worst/best figures for calculation).

Does one meet calorie needs with this Diet?

The jokers should go to market once in a while.

However they inflate the figures when calculating Growth rate of Economic Indices.

According to the new criterion suggested by the planners, if a family of four in Mumbai, Delhi, Bangalore or Chennai is spending anything more than Rs 3,860 per month on its members, it would not be considered poor. It’s a definition that many would find ridiculously unrealistic. Not surprisingly, the new above the poverty line definition has already created outrage among activists, who feel it is just a ploy to artificially depress the number of poor in India. The plan panel said these were provisional figures based on the Tendulkar committee report updated for current prices by taking account of the Consumer Price Index for industrial and agricultural workers.

Rising Food and Vegetable Prices.Why?

Main reason for increase in vegetable /food prices is due to online trading of commodities,which goes on unchecked,farmland operations by corporations,shrinking area for food production(land is being sold for real estate) ,hoarding and bottle necks in idstiribution.

Unless these issues are addressed in time , situation could become worse and the government shall be a mute spectator.

Look at Indian Agriculture Ministerwho says he could not help it and Finance Minister who requests(?!) traders to release stocks and the sluggishness of the bureaucrats who let 200 tons of Onions imported from Pakistan rot in Mumbai port!


Last month, global food prices surpassed their mid-2008 records, according to a report out from the United Nations Food and Agriculture Organization (FAO). The FAO’s food price index clocked in at 214.7 in December, up 4.2% in just a month, and breaking the previous record of 213.5 in June 2008.

“It will be foolish to assume this is the peak,” says FAO senior economist Abdolreza Abbassian. He calls the situation “alarming,” but dutiful bureaucrat that he is, he won’t call it a “crisis.”

Last month, global food prices surpassed their mid-2008 records, according to a report out from the United Nations Food and Agriculture Organization (FAO). The FAO’s food price index clocked in at 214.7 in December, up 4.2% in just a month, and breaking the previous record of 213.5 in June 2008.

“It will be foolish to assume this is the peak,” says FAO senior economist Abdolreza Abbassian. He calls the situation “alarming,” but dutiful bureaucrat that he is, he won’t call it a “crisis.”  Heck, even the Super Big Gulp ain’t what it used to be: Now with 9% less!


– Record food prices will hit the world’s poorest hardest, raising the risk of riots, export bans, foreign-owned farmland expropriation and further price spikes fuelled by short-term investors……..

So far, experts say weather-related supply shocks — floods in Australia, drought in Argentina, dry weather and fires in Russia and potentially crop damaging frosts in Europe and North America — were largely to blame. But they worry politics and markets could soon take over to produce a vicious circle.

“The danger is that what happens now is that you get a second shock as countries can respond by imposing export bans and financial markets investors pile in for short-term investment, pushing prices much higher, as they did in 2008,” said Maximo Torero, divisional director for markets, trade and institutions at Washington DC’s International Food Policy Research Institute (IFPRI).

Russia imposed export restrictions last year after fires and drought. In 2008, IFPRI says at least 13 countries including Argentina, Cambodia, Kazakhstan, China, Ethiopian, Malaysia and Zambia imposed either export bans or taxes, further squeezing supply.

“Clearly what is needed is to increase production through appropriate investment in agriculture, to increase the information on stocks around the world, strengthen the regulation of the futures markets and to have safety net mechanisms to protect the poorest consumers,” he said.

Political risk insurers, who provide protection against dangers such as confiscation or political violence, are watching closely — although they say there has not yet been any direct impact on premiums.

“The potential is there for food riots and also for governments to take action such as embargos on food exports or nationalisation of assets involved in food production or storage in order to protect their people — not always necessarily for the sake of altruism but often to preserve their position as governments in office,” said a senior underwriter in the London political risk insurance market.

The highest risks of farmland expropriation remain in Latin America, insurers say — particularly Venezuela, Bolivia and Ecuador — but this is more down to local political factors than rising prices. The greatest impact of the recent rally could be on land deals in Africa, some suggest.


The 2008 spike produced a flurry of interest in farmland purchases both from Western funds and richer emerging countries such as China and Gulf states keen to preserve their supplies.

While some deals fell through after the crash, others are now entering production. But they have proved controversial. Local anger over the purchase of Madagascan farmland by South Korean firm Daewoo was seen by some as a contributing factor in the island’s 2009 coup.

“The main risks will come where they are in an area where the population is short of food themselves and the deal is seen as being in some way inappropriately negotiated,” said Jonathan Wood, global issues analyst at Control Risks. “So many of these projects are in East Africa: Ethiopia, Kenya, Tanzania. But a lot will depend on the individual deal.”

Some investors such as London-based funds Emergent Asset Management and Chayton Capital say a key part of their strategy has been to ensure such projects clearly benefit the local community, for example through local milling.

“Smart investors don’t own the land,” said Bond at the World Bank‘s MIGA. “They work with contract farmers and see the domestic market as their first and most important market. It makes sense from a risk mitigation strategy’