The Government had given up differential pricing in September 1997 with the aim of achieving international parity in prices in the hydrocarbon industry.

But now, with escalating prices of oil, the industry feels that the Centre should switch back to the earlier system to help fertiliser units neutralise higher input costs. By doing this, the two other options of either increasing the fertiliser prices or increasing the subsidy amount, both of which have always drawn flak from various quarters, could be avoided.

The Fertiliser Association of India (FAI) has written to the petroleum ministry to the effect and is hoping that the next Government would be receptive to the idea and would take adequate steps.

FAI chief economist Uttam Gupta said that the domestic hydrocarbon sector was strong enough to bear a slight fallin its revenue which would result because of the move. "The deficit in the oil pool account is being blown out of proportion in the country. The fact is that PSUs like OIC and GAIL are earning huge profits and it would not hurt them if the Government decides to sell oil to the fertiliser industry at a discount."

Gupta pointed out that on several occasions oil pricing decisions were taken which went against the whole concept of maintaining international parity in prices. In April '98, when crude-oil prices had gone down no moves were made to bring down the domestic prices. Similarly, last year when naphtha prices went down, prices in India remained unchanged. "When the Government has not adhered to maintenance of international parity when the interest of the oil sector was at stake, it can also act in a similar manner to protect the interests of the fertiliser industry."

The fertiliser industry is emphasising on getting oil at discounted prices because it amounts to about 60 per cent of the total inputcost. If a check is put on oil prices by the Government, then it would bring down the subsidy bill by a big amount. If oil prices keep on increasing at the current pace, then the subsidy bill is estimated to increase by Rs 1900-2000 crore per annum.

If reverting to the differential oil prices regime is difficult for the Government it should at least direct the oil companies to sell their ware at FoB rates which would bring down prices by almost 25 per cent, said Gupta.

"The true spirit of liberalisation demands that the domestic buyers should be charged the same amount as the foreign buyers. If oil companies export at FoB prices, Indian buyers should also be billed the same amount instead of charging them more by including freight charges, port charges."