The retail prices of petrol and diesel were reduced by Rs 2 and Re 1 a litre, respectively, in mid-February, when the Indian basket of crude oil was close to $56 a barrel. Currently, even though the international crude oil prices are hovering above $90 a barrel, the prices of petroleum products in India have remained unchanged.
The meeting of the Fund with the ministry is under its Article IV mandate, which authorises the IMF to hold consultations with member nations on their economic policies. These are used as inputs to produce the IMF country report for its spring meeting in April.
A government official agreed that the petroleum ministry would have a tough time explaining to the IMF team how political compulsions in India overrule economic considerations in deciding crucial matters relating to fuel pricing. The IMF have a series of questions for the ministry.
Such as: What are the current disparities between the import-export parity prices and the actual petroleum products prices Why energy prices are falling in India, compared with the prices a year ago, despite higher international prices of crude oil What is the outlook for further price adjustments What is the required increase in domestic petroleum prices to reach a full pass-through of international prices How are the losses under the subsidised framework shared among upstream and downstream producers, and the government (what are the) Plans to reinstate automatic pricing formula"
Last but not the least is that, an explanation has also being sought on issuing oil bonds as also the details of the revenue inflows from corporate income taxes and dividends paid by petroleum sector PSUs to the government, compared with those of 2006-07.
The IMF team will also scrutinise the performance of the two Fortune 500 oil PSUsONGC and Indian Oil. The discussion on the two PSUs will include the financial outlook for 2007-08 compared with that of the previous year, the impact of the rupees appreciation on the financial performance of the two companies, the details of how the two PSUs hedge the exchange rate risks and the burden of price controls on their financials.