The Hindu Business Line : No takers for fuel prices export parity regime

“The suggestion of pricing fuel at export price was not acceptable as it would mean reduction in refining margins that would adversely impact the profitability of refiners.” – Mr Sarthak Behuria

Mr Sarthak Behuria

Our Bureau

New Delhi, Aug. 19 The high-powered B.K. Chaturvedi Committee’s recommendation to shift to 100 per cent export parity pricing for fixing consumer prices for fuel has found no takers among the public sector oil companies.

After a review meeting held on Tuesday by the Petroleum Minister, Mr Murli Deora, to discuss various issues and challenges faced by the oil companies as well as suggestions of the Chaturvedi Committee, the Petroleum Secretary, Mr R.S. Pandey, said, “Views of the oil companies are being solicited on the report and a decision will be taken in due course.”

Meanwhile, the Government is yet to form an opinion on the issue of raising petrol prices by Rs 2.50 a litre per month till March 2009 and diesel by Rs 0.75 till 2010, as suggested by the Committee. The Petroleum Minister, along with his officials and oil PSU chiefs, addressed media persons after the meeting.

“Suggestion of pricing fuel at export price was not acceptable as it would mean reduction in refining margins that would adversely impact the profitability of refiners – both integrated and standalone,” Mr Sarthak Behuria, Chairman Indian Oil Corporation, said adding that “when oil companies pay import parity price for crude, pricing products at export parity rates are detrimental. The current principle of import and trade parity must stay.”

The refiners would lose around Rs 27,600 crore in revenues if fuel is priced according to export parity rates. Further, the oil companies were also not in favour of another proposal by the Committee of reducing import duty on petrol and diesel to zero as it would result in reducing duty protection to the domestic refineries when compared with international refiners.

On the recommendation of levying a special oil tax on crude oil produced from the fields awarded prior to New Exploration Licensing Policy (NELP), senior Ministry officials maintained that no decision has been taken so far.

Mr R.S. Sharma, Chairman, ONGC, said “We favour a system which is transparent. The existing ad hoc of sharing subsidy burden by upstream companies resulted in Income Tax department disallowing the discounts and raising tax demand on the price not realised. In 2007-08, ONGC’s subsidy share was Rs 22,001 crore.”

At the meeting, the Ministry also asked the oil companies to clear the wait list for new domestic cooking gas (LPG) connections in 60 days. The Minister reviewed the supply and distribution of essential petroleum products in the country.

“LPG connections will be available on demand,” the Petroleum Secretary said, adding that “wait time for LPG connections will not be allowed to exceed two months.”

The Secretary also said that “the Ministry will be opening a grievance cell to address complaints.”

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