Panel to submit final report by mid-October

The Kirit Parikh panel on fuel pricing has suggested that the diesel prices should be increased by Rs 1-1.50 a litre every month as against the 45-50 paise monthly hike followed currently. This is expected to help the public sector oil marketing companies sell diesel at market rate in two years’ time.

A senior Petroleum Ministry official said that the proposal in the draft report of the panel will now be discussed among the stakeholders before the panel submits a final report. Recently, the Petroleum & Natural Gas Ministry had extended the timeline of the panel by a month. The report is now expected by the middle of next month.

The high-level panel headed by former Planning Commission Member Kirit Parikh has also suggested a draft trade parity mechanism for determining diesel price. The draft report, which is currently being consulted with the Petroleum Ministry, suggests that trade parity should continue for diesel pricing, as export parity would not work in a country where more than 80 per cent of the crude oil is imported, said a the official.

There is a contention between the Finance Ministry and the Petroleum Ministry on pricing of petroleum products. Finance Minister P. Chidambaram wants a fuel pricing mechanism benchmarked to export parity price.

On the other hand, Minister for Petroleum and Natural Gas M. Veerappa Moily wants the Parikh panel to revisit the current pricing methodology of import party/trade parity for diesel, PDS kerosene and subsidised domestic LPG and suggest a suitable pricing mechanism for sale of these products.

The trade parity is weighted average of import (80 per cent) and export price (20 per cent).

As on September 16, the Government-owned oil marketing companies are selling diesel at a loss of Rs 14.50 a litre. In the first quarter of 2013-14, the oil marketing companies met Rs 10,554 crore for selling fuel below market cost.

Import parity price means when a domestically produced fuel such as petrol, diesel or cooking gas is benchmarked to an equivalent imported good. On the other hand, in export parity mechanism the price is linked to cost of the exported item.

Moily said that the strategic petroleum reserve project in Visakhapatnam would be commissioned by January 2014, while two others would complete by March 2014.

Indian Strategic Petroleum Reserves is implementing projects at three locations – Visakhapatnam (1.33 million tonnes), Mangalore (1.5 million tonnes) and Padur (2.5 million tonnes).


On Friday, Moily said that benefits of any reduction in international prices would be passed on to consumers. It will be for first time since May that petrol price may be reduced.

“This is all dynamic pricing system and not static pricing... any advantage of price (reduction in international rates) and rupee (appreciation against US dollar) will be passed on to consumers... consumer will get full advantage,” he said.

Asked if a cut in petrol price was possible on September 30, he said “hope so.”

“Petrol price is a deregulated commodity, price of which is decided by our oil marketing companies based on input cost and other parameters,” Moily explained.

(This article was published on September 27, 2013)
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