The Hindu Business Line : TERI for review of petro product pricing formula

THE Energy and Resources Institute (TERI) has called for revisiting the import parity pricing (IPP) formula and the tax structure for petroleum products, particularly petrol and diesel.

In its study on `Petroleum pricing in India: balancing efficiency and equity' released here, TERI has said that the Government must soon move to a system of market determined pricing of petroleum products. "The IPP formula needs to be re-visited to ensure that the Indian refining industry enjoys a rational margin that is fair to producers as well as consumers."

The study said that the Government could define a sliding scale of excise duties that would ensure that its revenue expectations remain untouched with changes in international prices of crude and products. "This would not only ensure that the consumer does not have to face the multiplying effect on an ad valorem duty but also make transparent and certain the response of the Government to international changes," the study pointed out.

The contributions from petroleum, oil and lubricants to Central Government revenues registered a significant 22 per cent increase from Rs 33,806 crore in 2002-03 to Rs 41,386 crore in 2004-05 of which 68 per cent came from two products, petrol and diesel. The study has suggested reduction of ad valorem component of excise duties and sales tax to maintain revenues at levels that would accrue at a crude price of $45 per barrel through which both the Centre and the states can remain revenue neutral and also absorb the impact of rising oil prices.

As regards kerosene, the study suggests that the production of kerosene in the country could be phased out over a period of time. International prices of LPG are cheaper than that of kerosene. Stressing that only 1.62 per cent of the rural poor use kerosene, which is subsidised, as primary fuel for cooking while LPG penetration is higher at 5.6 per cent, TERI has proposed phasing out of kerosene production.

The study has suggested issuing energy debit cards (the equivalent of a prepaid telephone card) to targeted households as part of LPG subsidy and all subsidies to be given as direct subsidy instead on LPG cylinder.

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