Oil prices catch poll panel's eye

EC seeks explanation from petroleum ministry.

The Election Commission is learnt to have sought the petroleum ministry's explanation for not allowing oil marketing companies to raise product prices despite a spurt in international prices.

The commission is understood to have asked why the ministry is not following its declared policy of non-interference with prices in a decontrolled regime.

The commission's communication, according to sources, borders on accusing the ministry of trying to influence voters by keeping prices of some oil products, especially petrol, diesel, kerosene and LPG, low, for which the oil companies have to take a hit.

Petrol and diesel prices have not been revised since December 31, 2003, and LPG and kerosene prices were last revised in March 2002.

However, the ministry is understood to have responded by asserting that it has nothing to do with the pricing of oil products and that the companies are, in most cases, free to set prices.

The ministry has emphasised that the oil companies' profits have surged after the dismantling of the administered pricing mechanism.

It is learnt to have said that in 2002-03, the first year after administered pricing was removed, oil companies doubled their net profit to Rs 23,254.6 crore from Rs 12,708.9 crore in the previous year.

The petroleum ministry is learnt to have conducted a study of the profitability of some of the oil marketing companies where it has concluded that 60 per cent of their incremental profits during 2002-03 came from higher prices. The balance was from other factors like efficiency.

The petroleum ministry has argued that since the oil companies have been making huge profits in their refining and marketing operations, they have the capacity to absorb some increases in the international oil prices.