Diesel pricing: States queue at courts

The West Bengal government is planning to take state-owned oil marketing companies (OMCs) to court over dual pricing of diesel.

“I have consulted our legal department today. We are going to take a decision on approaching the court within the next 24 hours,” Madan Mitra, transport minister, told Business Standard.

Yesterday, the Madras High Court had granted an interim injunction against the OMCs’ dual-pricing system. The court’s directive was in response to a petition by the Tamil Nadu State Transport Corporation (TNSTC) against dual pricing for bulk and retail sales of diesel. The court order would have no implications outside Tamil Nadu.

When asked about the court order and bulk pricing, petroleum minister M Veerappa Moily said this was a policy decision and the government was studying it.

Petroleum ministry officials said there was no question of going back on dual pricing. “We are studying the order and will take a call soon. As far as bulk pricing is concerned, the government has no intention to revise it once again,” said a senior ministry official.

On January 17, the government had shifted to the dual pricing system and diesel decontrol to save Rs 12,907 crore on the subsidy front. The decision hit bulk customers such as defence forces, the railways and state transport undertakings (STUs). Now, OMCs are recording a drop of about 38 per cent in bulk sales.

Before dual pricing, of the total consumption of 70 million tonnes (mt) a year, bulk diesel sales accounted for about 11 mt. Of this, three mt went towards the defence forces and the railways.

STUs require 2.1 mt of diesel a year, while the railways need 2.27 mt. STUs would reportedly have to spend Rs 2,462 crore more on diesel every year, owing to the dual pricing system; the railways would have to spend Rs 2,700 crore more. Most STUs have no option but to revise prices. Due to dual pricing, bulk customers are paying Rs 9.5-11.5 a litre more in various states. The Gujarat government has asked its transport department to ensure diesel is not bought from depots.

STUs in Tamil Nadu would have to spend Rs 744 crore a year more on diesel. The state has eight STUs, with a fleet capacity of 20,500 bus services.

In the court, these STUs had argued 35 per cent of their losses were due to the increasing cost of high-speed diesel. In 2011-12, these corporations had recorded a loss of Rs 1,791 crore, with a cash loss of Rs 1,392 crore. Losses between April 2012 and January 2013 stood at Rs 756 crore, with a cash loss of Rs 397 crore.

(With inputs from T E Narasimhan & Gireesh Babu in Chennai)

SHIFT EFFECT

• Rs 12,907 cr of subsidy savings expected in shift to dual-pricing system
• 38% Drop seen by OMCs in bulk sales
• 11 mt Share of bulk diesel sales in total diesel consumption of 70 mt a year, before the shift
• 3 mt Went towards the defence forces and the railways, state transport undertakings (STUs) consume 2.1 mt of diesel a year
• Rs 2,462 cr Additional cost to STUs every year because of dual-pricing system; the railways would have to pay an additional Rs 2,700 crore annually
• STUs left with no option but to revise prices
• Decision had hit bulk customers such as defence forces, the railways and STUs