Annexure X - Refining Capacity at Beginning Of XI Plan

Annexure X - Refining Capacity at Beginning Of XI Plan

13. Annexure XI- Value Addition & Other Benefits of Surplus Capacity

The value addition, in the refinery, averaged about 27 percent since 2000 and ranged from 17 percent to 36 percent over last 6 years. This gain accrues to the country for every ton of product produced. Considering that the country imported crude worth Rs 1,71,702 crore ($ 38.8 billion) worth of crude during 2005-06 (P), the value addition on imported crude alone was about Rs 29,200 crore ($ 6.6 billion) considering a value addition of just 17 percent during the year. The value addition made by a refinery may be abstracted from the import data¹⁶ and value. The average crude price and product price since 2000 is as follows:

Figures in Rs/MT

Particulars	00-01	01-02	02-03	03-04	04-05	05-06
Avg. Imported Crude Price	8898	7674	9293	9233	12205	17272
Value of Crude need per MT of product after Fuel & Loss (8 percent)	9610	8288	10036	10036	13266	18774
Avg. Imported Product Price	13050	10526	12180	12561	16863	21902
Value addition	3440	2238	2144	2525	3597	3128
Value addition percent	36 percent	27 percent	21 percent	27 percent	27 percent	17 percent

Other Benefits

Downstream & Infrastructure Development

Refinery capacity addition has several direct and indirect benefits both - economic and social - for the country and the society at large. Refineries are capital-intensive projects, which require engineering design, materials, and labour. Development of the project itself induces economic activity in the region. After the completion, the refinery provides employment directly and indirectly through the services and materials that it consumes. The regions tax collections improve.

Surplus capacity, in general, is expected to put a downward pressure on domestic prices of petroleum products. The reason for such price movement is competitive pressure on the exporters to maximize their revenue. In effect, larger the surplus capacity, greater the sobering effect on domestic prices. While this process would have normally happed in a free pricing regime, introduction of trade parity has achieved the same by administrative means.

Addition in refining capacity enhances energy security by building greater flexibility in meeting the energy needs of the country. It is important to have the option to processes crude or import product, for an energy importing country like India. This is so because crude markets are generally larger, more stable and retain global government focus in contrast to product markets, which are significantly smaller, lack depth and therefore more volatile.

14. Annexure XII- Abbreviations