Govt Committed to Providing Fuels At Reasonable Prices .

S Jaipal Reddy, Minister of Petroleum and Natural Gas has said that the Government is committed not only to protect the interest of the common man, but also to make available petroleum products of right quality at reasonable prices to consumers. Addressing the meeting of the Consultative Committee of Members of Parliament attached to his Ministry here today, he stressed that at the same time it needs to be appreciated that our long term energy security depends on the financial health of the OMCs. “If their financial health deteriorates on account of the price under-recoveries, their ability to discharge their assigned task of supplying the entire country with petroleum products would suffer”, he added.

The meeting was attended by  R.P.N. Singh, MOS(PNG), Members of the Consultative Committee, Secretary, Additional Secretary, Officers of the Ministry and Chief Executive Officers of Oil Public Sector Undertakings.

The Minister stated that the Agenda of the meeting, “the petroleum product prices and under recoveries of the Public Sector Oil Marketing Companies” was of great importance as India imports more than 80% of its crude oil requirements. He also said that the international prices have been rising for reasons beyond obvious control. After the extreme volatility of crude prices in 2008-09, the international prices of crude oil have consistently risen in the recent past. The average price of the Indian basket of crude oil, which was 69.76 dollar per barrel in 2009-10, is hovering around 112 dollar per barrel in the current year.

He informed inspite of recent price increase, cuts in customs and excise duties, the OMCs are currently suffering under-recoveries to the tune of Rs. 235 crore per day and are expected to incur under-recovery of over Rs. 1,21,000 crore during 2011-12. Besides absorbing an annual estimated revenue loss of Rs. 49,000 crore on account duty reductions, the Government will also be required to compensate a large portion of these remaining under-recoveries.

Reddy underlined that the under-recoveries have had a significant adverse impact on the financial health of the Oil PSUs, with diminishing cash flows and reduced resource generation for capacity expansion and modernization. The OMCs are forced to borrow heavily from the market even for their working capital requirement, which is leading to mounting interest burden on them.

The Minister further said that in the wake of an alarming situation arising out of the projected massive under-recoveries of Rs. 1,71,000 crore during the current year, and with aim of minimizing the burden of rise in international oil on consumers, the Government has eliminated the Customs Duty on Crude Oil and reduced Customs Duty on petroleum products by 5%. Excise Duty on Diesel was also reduced by Rs. 2.60 per litre. We have passed on only a very minimal burden of the high international oil prices to the consumers through increase in price of Diesel by Rs. 3 per litre, PDS Kerosene Rs. 2 per litre and Domestic LPG Rs. 50 per cylinder.

The domestic prices of petroleum products were decontrolled in April, 2002 except for PDS Kerosene and Domestic LPG. However, since 2004, with an aim to protect the consumer from the inflationary impact of high international oil prices and to provide stability to the domestic prices, Government started modulating the prices of sensitive petroleum products, which led to incurrence of under-recoveries to the OMCs.

Reddy pointed out that during the last year, to compensate the under-recoveries of Rs. 78,190 crore, the Government had given cash assistance of Rs. 41,000 crore, while the upstream Oil PSUs has contributed Rs. 30,297 crore. The remaining under-recoveries of Rs. 6,893 crore had to be absorbed by the OMCs.

He recalled that based on the recommendations of the Expert Group headed by Dr. Kirit Parikh, the price of Petrol was made market-determined with effect from 26th June, 2010. However, in view of sustained high level of international oil prices and the domestic inflationary conditions, the Government continues to modulate the retail selling price of Diesel, PDS Kerosene and Domestic LPG.

The Members suggested that the points/issues raised by them should be replied to and an action taken note may also be provided. The Minister accepted their request for detailed discussion on the subject in the forthcoming meeting.

The following members attended the meeting:

From Lok Sabha S/ Chandrakant B. Khaire, Harishchandra D. Chavan, K. Samba Siva Rao, P.R. Natarajan, Purnamashi Ram, Radhyey Mohan Singh, Sushil Kumar Singh, Umar Shankar Singh, Partap Singh Bajwa and Rama Shankar Rajbhar. From Rajya Sabha S/ A.A. Jinnah, Birendra Prasad Baishya, Brijesh Pathak, Kumar Deepak Das, Mukhtar Abbas Naqvi, Praveen S. Rashtrapal, Raashid Alvi, Rajniti Prasad, Ranbir Singh Parjapati and V. Hanumantha Rao.

Source : indiainfoline.com