Govt told not to completely free pricing of petroleum products

A Parliamentary panel has asked the government to "refrain" from completely freeing the pricing of sensitive petroleum like diesel but advocated compensating oil firms for losses incurred on selling fuel below cost.

The Standing Committee on Petroleum and Natural Gas in its report tabled in Parliament today said in most countries the prices of petroleum products are being regulated to contain the inflationary impact of high oil prices and give relief to their people.

"The Committee are of the view that in our country which still is a growing economy, it will not be prudent to deregulate the prices of sensitive petroleum products as it can aggravate inflation and adversely affect the common man," the report said.

While petrol price was deregulated in June last year, the government continues to control retail rates of diesel, domestic LPG and kerosene. State-owned oil firms currently lose Rs 12.95 per litre on diesel, Rs 29.99 a litre on kerosene and Rs 287 per 14.2-kg LPG cylinder.

The panel noted that the mounting under-recoveries or revenue loss on fuel sales had detrimental effect on the financial health of the oil marketing companies.

"The Committee desire that cash assistance to the OMCs on account of under-recoveries should be transferred at regular intervals on pre-determined basis," the report said.

The oil firms are projected to lose Rs 1,32,000 crore on fuel sales during the current fiscal. A third of this will come as assistance from the upstream firms like ONGC but for the rest the government has to look at ways of meeting them.

"The Committee desire that government tread cautiously in the matter and taking into due consideration all the stakeholders, devise ways for protecting the interests of the common man," the report said.

It asked the government to set up a study group to look into the entire gamut of under-recoveries of oil companies and based on this a suitable and clear cut policy be chalked out so as to timely compensate the oil firms for any losses incurred on selling fuel below cost.

It noted that the central government had sacrificed Rs 50,000 crore in revenue by cutting customs and excise duty to soften the impact of rising international oil rates.

The panel said the state government too should follow suit and give relief to common man by bringing down sales tax or VAT on petrol, diesel, domestic LPG and kerosene.

Advocating uniform level of state sales tax, the Committee suggested the government levy "a cess on diesel cars to be paid at the time of purchase of diesel vehicle and collection of cess should go for compensating the under-recoveries of oil companies."