The Hindu Business Line : Petroleum pricing: In defence of oil marketing companies

ASKED in the Lok Sabha why the national oil marketing companies were not cutting petrol and diesel prices in tandem with declining global crude prices, the Minister for Petroleum and Natural Gas, Mr Mani Shankar Aiyar, made a spirited defence of oil refining and marketing companies.

It all started in question hour, when Congress member Mr Eknath M. Gaikwad sought to know whether the government proposes to introduce dual and differential pricing for petro products. The Minister said an inter-ministerial committee under the Chairmanship of Dr C. Rangarajan, set up in October 2005, would examine this issue and come out with its recommendations in six months. He, however, hastened to add that experience in the past of such a dual pricing system has not been "happy" as it gave rise to "black-marketing, adulteration and malpractices".

The Minister did concede that crude prices globally have fallen from an average of $59.74 per barrel in September 2005 to $56.28 per barrel in October, and $53.56 per barrel on November 25, 2005 and are still falling.

When BJP member Mr Jaswant Singh Bishnoi sought to know why the Government is not passing on the benefit of falling crude prices to domestic consumers, the Minister reeled off figures to state that, as it is, the oil marketing companies take 51 per cent of the price hike burden and the government another 36 per cent, with only 13 per cent borne by the consumers.

As such the harsh impact is not felt by the consumer as the domestic price of petro-products is still below the international parity price with, the under-recoveries of the oil companies continuing unabated. This amounted to Rs 20,146 crore in 2004-05.

Mr Aiyar stated wryly that the under-recoveries this fiscal are likely to be substantially larger than last year. The message is that before consumers hope for soft product prices, the national oil companies and the government have the first charge on falling crude prices!

When CPI(M) leader Mr Rupchand Pal sought to know whether the massive funds garnered by the Oil Industry Development cess could be used to provide a modicum of relief to consumers from rising prices, the Minister said that the legislation on this provides that the cess funds can be used for other industries.

He cited how more of the funds go to the fertiliser industry than to petroleum! When another member from the BJP, Mr Annasaheb Patel, sought to know whether oil production in the country has been declining, the Minister admitted that today's oil production remained the same as it was 16 years ago, in 1989-90.

However, a silver lining is that production of petroleum products is rising and the country exported Rs 28,000 crore worth of petroleum products last year, thanks to more refining capacity being added.

When some members wanted to know whether the refining companies accumulate profits piggybacking on the global crude price escalations, the Minister said that national marketing companies, which are into the refining business, do not do so as they shoulder the burden of providing subsidies to end-consumers, while stand-alone refineries might be making some profits.

The Minister further said "we have raised the issue with stand-alone refineries to give some discount to consumers".

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