Petroleum secretary S Sundareshan said on Wednesday that a realistic pricing of fuel was essential to enable oil companies to expand and meet the country?s growing energy needs.
?There is a need for realistic pricing of petroleum products (so that) the companies do not suffer under-recoveries (losses due to selling fuel below cost)?It will be impossible for the companies to fund expansion projects (needed to meet the rising energy demand),? Sundareshan said at an international symposium on fuels and lubricants here.
He said the challenge before the government was to protect oil marketing companies from under-recoveries.
Indian Oil, Bharat Petroleum and Hindustan Petroleum lose Rs 4.97 a litre on petrol, Rs 3.27 a litre on diesel, Rs 16.91 a litre on kerosene and Rs 267.39 per LPG cylinder because they sell fuel at government fixed price.
A part of the under-recoveries are bridged by the government through subsidies, while producers give some discounts and some losses are absorbed by the companies. An expert panel chaired by former Planning Commission member Kirit Parikh had recently advised the government to free petrol and diesel prices and to raise prices of kerosene and LPG moderately to reduce the under-recovery. But the ruling coalition could not muster the political support to go ahead with the proposals.
Sundareshan said state-run firms will intensify domestic exploration and production work and pursue overseas acquisition of oil and gas assets. He also said the government is not planning to sell equity in Indian Oil Corporation (IOC) and Oil and Natural Gas Corporation (ONGC) immediately as the unrealistic pricing of fuel is affecting their valuation. ?There is no serious consideration (on follow-on public offerings in IOC and ONGC) at this juncture,? he told reporters.
The secretary also said the government was planning to rationalise multiple prices of natural gas in the country to make fuel cost uniform for all consumers. The government is exploring different models of price pooling of natural gas produced from different fields under different production sharing deals with companies. Depending on the source, the price of natural gas now varies from $1 to $ 5.73 per million British thermal units.