The oil import bill for the full last year stood at Rs 70,000 crore for importing 80 million tonne of crude. While the quantity of crude imports will remain the same for this year also, sudden increase in international crude oil prices by over 40 per cent will take the import bill for the current year to much higher levels. It is already up by Rs 4,000 crore for the first six months, a senior petroleum ministry official said.
While the average price of crude imported in the last six months is around $25.75 a barrel, the last three months average has already crossed $27-a-barrel mark. As against this, the average price of crude during 2001-02 was $23.5 a barrel.
The petroleum ministry has already taken up the case of reducing duties on crude and petroleum products with the ministry of finance. I have held preliminary discussions (on the issue) with finance minister Jaswant Singh. Further discussions would take place next week, Mr Naik told reporters.
Mr Naik said that his ministry will build a case for duty cut that would be revenue neutral, as the loss of revenue would be offset by the rise in prices.
Though Mr Naik declined to say as to what percentage of duty cut was necessary to offset the spike in crude prices, sources indicated a 2 per cent excise cut may be necessary.
After the dismantling of administered pricing mechanism (APM), while state-owned retailing firms were given freedom to align their costs with international selling prices of products every 15 days, the finance ministry was to consider duty reduction or increase every three months in step with increase or decrease in crude oil prices.
Mr Naik said that he would also press for early audit of oil pool account for release of balance due to the oil companies. Government has, in April, issued bonds worth Rs 9,000 crore to state-run oil companies to liquidate about 80 per cent of their outstandings with the oil pool account and the remaining was to be liquidated after an audit.
Besides, petroleum minister would also seek early issuance of bonds for Rs 2,000 crore which oil companies took during the first quarter of this fiscal for maintaining oil prices in the face of steep hike in crude prices.
Mr Naik, who returned on Tuesday after attending the 8th international energy forum in Osaka, Japan, said the oil cartel organisation of petroleum exporting countries (Opec) has agreed to review the $1.50-2 per barrel premium being charged on India.
The minister said that he raised the issue of pricing pattern by the west Asia producers for North America, Europe and the countries located on the east of west Asia (India, Japan, China, Korea and others). As per the methodology for fixation of official selling prices by the West Asia producers, on fob (free on board) basis, crude costs $1.50-2 per barrel higher in comparison to north American and European markets.
The issue (of disparity in pricing of crude oil) has been recognised by international forum. Opec secretary-general has assured to review the Asian premium. This premium is currently being charged from India, in spite of it being geographically closer to West Asia. Japan, China and Korea too have supported our contention of removing the disparity in the pricing, Mr Naik said.
The minister said that during his visit to Osaka, he held one-on-one bilateral meetings with Saudia Arabia, Kuwait and Iran the major players in Opec Mr Naik pressed for repeal of the Asian surcharge.
They have agreed to consider this after we provide them more information on the quantities lifted by India and the price being paid, he said.
According to Mr Naik, the US and European countries were being supplied crude at lower price because of large quantities consumed by them.
Consumption by India, Japan, Korea and China will overtake American crude oil consumption in the next couple of years. In a high price scenario, there is a need for oil producers to extend concessional pricing and liberal credit terms to developing countries, Mr Naik said.
Discussions at the meeting, which brought together oil producing and major consuming countries, focused on current international issues like price volatility, limited transparency and reliability of data as well as long-term energy situation, he said.
Mr Naik said the oil markets were in turmoil as the Opec quota had fallen from about 5 million barrels per day between 1998 and 2002 while oil demand during the corresponding period had grown by 2.5 million barrels per day.
Speculative activity thrives in a market with deficit supplies and low inventories and there is a need for oil producers, with substantial spare capacity, to increase production and bring prices down to reasonable levels and minimise price volatility, he said.
On ways of reducing price volatility, the minister suggested Opec implement caps and floors for physical cargoes when the price band mechanism is breached besides adjustment of supplies.