Petro ministry seeks subsidy on PDS kerosene, LPG, freight for far-flung areas

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Ahmedabad, January 22:: Following the dismantling of administered pricing mechanism (APM) in the hydrocarbon sector, on April 1, 2002, the government is considering appointing a regulator to ensure enforcement of marketing service obligations by the entities and retail service obligations by their dealers and distributors.

In addition, it is proposed that oil companies be permitted to enter product exchange and hospitality agreements on a commercial basis for a period of only around two years.

These are among the proposals sent for Cabinet approval by the ministry of petroleum and natural gas as part of its note on dismantling of APM. The ministry has also sought Cabinet nod on liquidating the cumulative outstandings of the oil companies from the oil pool account, which stood at around Rs 12,000 crore as on December 31, 2001. In this regard, the ministry has proposed issuing transferable bonds of seven-year tenure to the extent of 90 per cent of the amount equivalent to the provisional amount of the oil pool deficit on settled claims up to March 31, 2002 with their coupon rate same as government security bonds for the same duration.

As per the note, the balance due amount to the oil companies would be liquidated by issuing bonds after obtaining audited results.

Pricing of indigenous crude: The note has suggested that effective April 1, ONGC and OIL would be permitted to market the crude oil produced by them in the domestic market. Furthermore, it is proposed that post-APM, prices of indigenous crude would be market determined. In this regard, the ministry of finance would separately work out the modalities to raise resources from incremental gains accruing to ONGC and OIL from the sale of indigenous crude.

Post APM subsidies: The ministry has recommended that the existing subsidy level of 33.3 per cent and 15 per cent on PDS kerosene and domestic LPG of the import parity be continued and it has been left to the Centre to decide the post-APM consumer prices of these products depending upon the prevailing international prices, duty structure etc. To start with prices of these products would be administered through the companies marketing them namely IOC, HPCL, BPCL and IBP. The other companies would be considered later. It is also proposed that the subsidy should be phased out in three to five years.