A day after the Kirit Parikh committee recommended freeing of auto fuel prices and increase in kerosene and LPG prices, the Union petroleum ministry called a meeting of the public sector upstream and downstream oil companies to discuss the road ahead.
Though oil companies have welcomed the report, they are keeping their fingers crossed, since the bold recommendations have invited political criticism.
“We had a meeting on the Parikh Committee report. I am sure that by next week, the ministry will be ready to offer its suggestions. This has to go to the cabinet,” said Murli Deora, minister for petroleum and natural gas. “We are also inviting suggestions from the general public through our website.”
Executives of Oil and Natural Gas Corporation (ONGC), GAIL, Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPC) and Bharat Petroleum Corporation (BPC) attended the meeting.
S Sundareshan, petroleum secretary, said the ministry would send its proposals to the Cabinet by next week. Asked if a decision on the recommendations could be expected before the Union budget on February 26, he said, “I hope so.”
Sources said while Deora was convinced about a rise in petrol prices, he was not sure about cooking fuel price increases.
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The Parikh committee had recommended market-determined pricing for petrol and diesel, while linking the price of domestic LPG and PDS kerosene to the increase in per capita GDP and agricultural GDP. At the current levels, it translates to a rise of Rs 3 a litre on petrol, Rs 3-4 on diesel, Rs 6 a litre on kerosene and Rs 100 on each domestic LPG cylinder.
To bring down the underrecoveries suffered by oil marketing companies on sale of LPG and kerosene, the panel had suggested periodic reduction in PDS kerosene allocation, based on the level of electrification in villages and a periodic price increase. The eventual goal is to move to a ‘smart card’ system of direct subsidy through use of a citizen’s unique identification number.
It also recommended that the two upstream companies, Oil and Natural Gas Corporation and Oil India, be asked to share a portion of their incremental revenue from nominated blocks. While accepting ONGC’s recommendations on a graded increase in burden sharing, based on increase in crude prices, the committee rejected the idea of a windfall tax.
Share prices of most public sector oil companies gained today, even though the Sensex closed with a dip of 271 points. GAIL gained 3.14 per cent to close at Rs 418.20, ONGC gained 0.56 per cent to close at Rs 1,139.50, IOC gained 0.16 per cent to close at Rs 316.80 and BPC ended the day with a gain of 0.35 per cent, at Rs 582.50. The stock prices of HPC and OIL, however, lost 0.84 per cent and 0.98 per cent, respectively.
Govt in a spot on fuel price increase
A day after an expert group headed by former Planning Commission member Kirit Parikh recommended market-determined pricing for petrol, diesel and other fuel products, the government was looking for ways to dilute the suggestion substantially, after the proposal received criticism from within the ruling United Progressive Alliance (UPA).
“If the Parikh committee report is accepted at all, all we will do is a small increase in the price of petrol,” a top source in the government said.
Publicly, ministers gave hints that political compulsions would not let the government accept the report in totality. “The government will ensure that the least burden is passed on to the poor and the common man... while also ensuring that the financial health of (PSU fuel retailers) is protected,” Minister of State for Petroleum and Natural Gas Jitin Prasada said amid protests, both from the UPA allies as well as the Opposition over the proposed price rise.
The Parikh report could not have been more ill-timed. The Congress Working Committee (CWC) is meeting tomorrow to discuss the price rise issue. This will be followed by a conference of chief ministers on the same issue. Privately, Congress leaders fretted that leave alone the allies, such a drastic increase in price would not fly even in CWC.