PSU oil firms underpay Rs 514 crore to GAIL for LPG purchase

Public sector oil marketing companies have been underpaying GAIL (India) for the liquefied petroleum gas (LPG) purchased by them. The under-payments to GAIL during April 2002-November 2003 came to Rs 514 crore.

This more than offsets the Rs 323-crore LPG subsidy burden that GAIL has to share with marketing companies this financial year as per a formula devised by the petroleum ministry.

GAIL has written to the petroleum ministry that as per its directive, the ex-fractionator import parity price of domestic LPG is to be fixed by adding the inland freight element to the landed cost of LPG at the designated port.

But the prices fixed by the oil marketing companies for GAIL's LPG plants in the period after the scrapping of the administered pricing mechanism (APM) in the oil sector do not include inland freight element at all.

"However, it is understood that the oil companies have taken into account the freight element while claiming the subsidy. Therefore, it is requested that while fixing the import parity price for LPG plants of GAIL, the inland freight element from designated port to the concerned LPG plant should be included," GAIL has argued.

Moreover, while fixing the ex-fractionator prices for November 2002, a cap was imposed and the import parity price was frozen at the October 2002 level.

This ceiling continued till May 2003 and GAIL's ex-fractionator LPG prices continued to remain frozen though the international prices witnessed a steep increase during this period.

Besides, the central sales tax paid by GAIL on the inter-state sales of LPG carried out under the directives of the marketing companies have not been reimbursed to GAIL though under the 'irrevocable taxes compensation scheme, 2002,' the marketing companies have claimed reimbursement for the CST paid by them.