Tuesday, April 2, 2002, Chandigarh, India


M A I N   N E W S

Petro prices decontrolled
Naik asks FM to avert price hike

New Delhi, April 1
The government today dismantled the three decade-old oil price controls on petrol and diesel amidst firming up of global crude oil prices, which prompted Petroleum Minister Ram Naik to petition Finance Minister Yashwant Sinha for excise duty cuts to avert any immediate price increase of petro products.

With the dismantling of the administered pricing mechanism (APM), prices of petrol and diesel have become market determined from today, Mr Naik said.

“I have already drawn the attention of the Finance Minister to the continuous increase in international crude oil prices. From $ 19.5 to $ 20 per barrel when the Budget was under formulation, present oil price has gone up to over $ 25 a barrel,” Mr Naik said.

The average price of Indian basket of crude since the presentation of the Budget on February 28, is $ 23.33 per barrel, he said.

With every one dollar increase in crude prices, petrol should be dearer by 55 paise per litre while diesel prices should rise by 45 paise.

Mr Naik, however, ruled out any immediate reflection of rise in global oil prices in domestic petro prices. “I have advised (national) oil companies to plan a strategy in which the changeover (from administered pricing to decontrol) is smooth and customers are not burdened. In the transitionary period oil companies would absorb volatilities in the international market,” he added.

While stating that he would not give directions to oil PSUs on the price front, he said: “I feel there should be stability in prices in the interest of consumers. Price changes should not be frequent. Changes can be effected every month or every three months.”

“Since currently only PSUs are marketing petro products, I desire that the changeover to deregulated market should be smooth,” he said while indicating that prices may not undergo changes in the first three months of dismantling of the APM.

In the deregulated scenario, prices of petro products would be governed by import parity, Mr Naik said adding retail pricing, post-APM, would be based on imported cost plus freight and local taxes.

While the Union Budget had factored international crude oil prices at $ 19.5 a barrel when it prescribed 32 per cent excise duty on petrol besides surcharge of Rs 6 per litre and 16 per cent duty on diesel, crude prices have shot up to little less than $ 26 per barrel in the subsequent month.

The increase in crude oil prices should have translated into an increase of Rs 2.30 per litre in the prices of petrol, Rs 2 per litre on diesel, Rs 1.35 per litre on kerosene and Rs 15-20 per cylinder on LPG.

“Beyond the transitionary period, which could be as long as three-months, domestic prices would be a reflection of increase or decrease in global prices,” the minister said.

He said the Oil Coordination Committee had been abolished, and the government had issued bonds worth Rs 9,000 crore to oil companies against their 80 per cent outstanding with the Oil Pool Account.

Remaining deficit in the oil pool account, which ceases to exist from today as part of deregulation of oil sector, would be liquidated after an audit by the CAG, he said.

Mr Naik said kerosene for public distribution system (PDS) would carry a flat subsidy of around Rs 3 per litre while domestic cooking gas (LPG) would have a subsidy element of Rs 90 per cylinder. Besides, freight subsidies for supply of PDS kerosene and domestic LPG in the far-flung areas would also be provided by the government.

“Subsidy on PDS kerosene and domestic LPG will be phased out in three to five years,” he said. Dismantling of the APM would also see indigenous crude oil produced by Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) being given market determined price, he said. A cell by the name of ‘Petroleum Planning & Analysis Cell’ would be created to monitor domestic and international market movements in the deregulated scenario, he said. “For the setting up a regulator for the downstream petroleum sector, the ministry has finalised the draft Bill which would be introduced in Parliament when it reassembles after April 14. Till such time the regulator is in place, the Ministry will oversee the functioning of the downstream oil marketing companies,” Mr Naik added. PTI 

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