Govt panel to look at oil under-realisation

The committee also includes Saumitra Chaudhuri, member, Prime Minister's economic advisory council and Arvind Virmani, chief economic advisor to the government.

The committee under Chaturvedi, who is a former Cabinet secretary and petroleum secretary, will examine the issue of calculations of under-recoveries. Under-recovery is the difference between the optimum, or "desired", selling price of fuels compared with the retail selling price in India.

 

The government currently allows the oil companies to calculate the desired selling price primarily based on an method which assumes that the fuel is being imported, when in reality only a very small part of the total fuel consumption is actually imported.

The import parity basis calculation adds cost such as freight, insurance and import duty, and also components such as refinery margins and marketing margins to the global price of the fuel which drives up the reported under-realisations.