The Hindu Business Line : Aiyar for equitable sharing of oil price hike burden

THE Petroleum Minister, Mr Mani Shankar Aiyar, has said that the price revision mechanism for domestic fuel may have to take into account an equitable sharing of the burden among the three stakeholders — the consumers, the Government and the oil marketing companies (OMCs).

"We have to see whether there is some way in which the burden (of international hike in crude prices) can be more equitably shared between the three stakeholders," the Minister told Business Line.

Earlier attempts by the Government to raise petrol and diesel prices have come in for severe criticism from the Left, who have been opposing any price hike. Following a recent meeting of the Left allies with the Finance Minister and the Petroleum Minister, the Finance Ministry is examining the suggestions made by them.

Indications are that a price formula may be worked out soon. The Left allies led by the CPI(M) have been maintaining that it is not fair to burden the consumer with an increase in cess from Rs 1.50 per litre to Rs 2, in view of the abnormal rise in crude price. They have also been voicing their concern over the new excise duty structure, which according to them would actually help the stand-alone private refineries, especially Reliance, while hitting the public sector oil companies.

Import duty reduction has helped the refining sector, but the excise duty changes applicable after refining would affect the marketing or retail sector management by oil public sector firms.

The Left parties have pointed out that the import parity in pricing of petroleum products is not favourable in view of India's own indigenous capacity in the refining sector, which has reduced import of petroleum products to a minimum. This has resulted in undue refining margins, particularly to stand-alone private refineries gaining the most with the gross refining margins going as high as $12 a barrel compared to $4-6 before the present pricing mechanism came into force.

As for the hike in international crude price, the Left has proposed that it could be balanced through a price stabilisation fund, keeping in view high volatility of crude price. Further, oil PSUs should cut down some of their frivolous expenditures on advertising and public displays, as the competition in retailing till now is mostly restricted to PSUs only, the Left have stated.

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