Export parity pricing unviable for oil firms: Petroleum Minister

At present, prices of petrol and diesel are calculated by adding 2.5 per cent customs duty to the refinery gate price and also adds the freight rates of shipping the fuel to international prices. The difference between the refinery gate price and retail selling price is the under-recovery which the Finance Ministry compensates. However, it says this system of calculation brings "inefficiencies into the system".

 

However, Mr Moily considers the EPP system "unviable". The Petroleum Minister has said the EPP system suggested by the "B.K. Chaturvedi Committee has been rejected by the government previously". In fact, the present system of trade parity has been accepted and vetted by, "expert panels headed by C Rangarajan and Vijay Kelkar".

 

"From 2005-06, oil companies have not been adding any margin on crude oil or on petroleum products. The import price plus transportation and taxes are all that there is in the selling price," the minister said at the Shastri Bhavan after a meeting with oil marketing companies.

 

The EPP may save "Rs 17,000 crore but where will they (oil firms) get money for expansion and modernisation of refineries", he asked. "It is a hand-to-mouth situation for oil companies -- they earn in the morning and spend all the money by the evening. There is no surplus generated," Mr Moily added.

 

Mr Moily was referring to Finance Minister P Chidambaram's proposal for more investments to revive the economy.

 

"...But if there is no money, where can the investments come from," Mr Moily asked, adding that he has taken up the issue (of subsidy compensation under the current system) with the Prime Minister and that he will also meet the Finance Minister to discuss the issue.