Oil & Gas reforms on front burner
on oral directions, the companies raised prices by about 50 paise the same night, reducing their under-recoveries on the fuel to Rs 9.1/litre. The OMCs later said the correction in retail price, along with price deregulation of bulk diesel, would reduce their under-recoveries by some Rs 15,000 crore on “annual basis,” but pleaded ignorance on whether there would be similar corrections in retail prices for every month till the under-recoveries on the fuel are nullified.
For domestic LPG and kerosene, under-recoveries stand at Rs 490.50/cylinder and Rs 30.64/litre respectively. OMCs incur daily under-recoveries of about Rs 380 crore on the sale of diesel, kerosene and domestic LPG.
The government reckons that once both petrol and diesel are deregulated completely, private oil companies which have idled their retailing network and deferred expansions, would start investing heavily. Market-determined pricing for bulk consumers, which account for a fifth of diesel consumption in the country, might prompt firms like Reliance and Essar to venture into the market.
Sources said the finance ministry, in parallel, is considering shifting to 100% export parity formula for estimating under-recoveries of oil companies, a move that would reduce the OMCs’ under-recovery claims. (The current trade parity pricing combines import parity and export parity in the ratio of 4:1 to decide the refinery-gate price due to OMCs. The mark-up of trade parity over export parity is about 5%).
While the export and import prices don’t vary too much, the import-parity price (landed cost) – which includes tariffs, duties akin to domestic products and
Be the first to comment.
