The Hindu Business Line : Govt considering new petro product pricing mechanism

WITH oil marketing companies continuing to pursue with the Government the issue of reviewing the retail price of petroleum products in order to mitigate their under-recoveries, the Ministry of Petroleum and Natural Gas may be forced to work out a new pricing mechanism in keeping with the international oil price scenario.

Indications are that the Ministry may opt for a six-monthly review of petroleum product prices.

However, sources said, what is currently required is having a proper price revision structure in place based on which the decision to review the petroleum products price could be taken.The prices of petroleum products were last revised on June 20. To a query on whether the Government would be introducing the concept of price band mechanism, the Petroleum Minister, Mr Mani Shankar Aiyar, had then said that the price band concept would be considered once the international prices stabilised.

The Government had directed the oil marketing companies to increase petrol prices by Rs 2.50 a litre and diesel by Rs 2 a litre.

The increase, however, fell short of the demands of the oil companies, which had been calling for a steep increase in all four major petroleum products to offset their losses.

The prices of LPG and kerosene had remained untouched.

Oil marketing companies have been stating that diesel is under-priced by about Rs 5.30 a litre and petrol by Rs 3 a litre.

In fact, the under-recoveries of IOC during the April-June period on petrol, diesel, PDS kerosene, and domestic LPG were to the tune of Rs 4,869 crore, of which Rs 1,917 crore was on account of PDS kerosene and Rs 832 crore on account of domestic LPG.

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