India among nations with cheapest petro products

Lowest prices of key petroleum products were found in Venezuela & Egypt

According to a recent policy research paper by the World Bank for key petroleum products, India is among those countries in the world where the prices of petroleum products are at the lower end.

The study, ‘Petroleum Product Pricing and Complementary Policies — Experience of 65 Developing Countries Since 2009’, found that the lowest prices were found in Venezuela and Egypt, closely followed by Iran and Iraq for gasoline and diesel, Indonesia and India for kerosene, and Iraq and Bolivia for Liquefied Petroleum Gas (LPG). Venezuela stands out as having petroleum product prices far lower than in any other country, with the exception of LPG, for which the official price in Egypt was even lower.

The study says about two-thirds of the study countries have kept domestic prices below market-clearing levels for one or more fuels in the past three years, subsidising consumers. It adds that with the additional burden sharing by the oil and gas companies included, fuel subsidies amount to about 2 per cent of the GDP.

“This is so because of the government policies and because of the larger subsidy that we have. We have the largest number of people living below the poverty line. While assessing these, one should also keep in mind that a large number of people are still living off-grid to power and it is because of the subsidies that these people are able to afford these products,” said Kalpana Jain, senior director, Deloitte.

Notifying the different prices by end use in LPG, the report said the differences in unit prices have been as large as 280 percent favouring LPG sold in small cylinders in India, 220 percent in Tunisia, 175 per cent in Indonesia, and 170 per cent in Thailand. According to a ministry official, rather than higher subsidy rates, the government is looking at whether it goes to the deserving.

The United Progressive Alliance government is likely to start using the Direct Benefits Transfer scheme for disbursal of subsidy on cooking gas from May 15. The Cabinet is likely to take a call on this by this week.

Meanwhile, according to the Petroleum Planning and Analysis Cell, too, the prices of LPG and kerosene in India are lowest compared to its neighbouring countries.

Oil companies in India are suffering an underrecovery of Rs 6.52 a litre on the sale of diesel, Rs 30.49 a litre on kerosene and of  Rs 434.50 per cylinder on LPG. During the April to December period, the underrecovery on diesel stood at Rs 73,815 crore, kerosene at Rs 21,891 crore and LPG at Rs 29,148 crore.