RIL, ONGC seek LPG price hike

Oil and Natural Gas Corporation (ONGC) and Reliance Industries Ltd (RIL) have asked the government to issue instructions to oil marketing companies (OMCs) for lifting the freeze on prices of LPG and kerosene and bring them to the import parity level. OMCs had frozen the price they pay to producers of the two products in March.

The directive comes as the government was planning to direct all refining companies, including those in the private sector and joint venture refineries, to produce 7 per cent of their total refinery crude throughput as kerosene to maintain adequate supply.

The price of LPG was frozen at $376 a barrel while that of kerosene at $418 a barrel following a spike in international prices. At the current level, LPG has touched $400 a barrel while kerosene at $496 is threatening to touch $500.

The freeze was effected since on every LPG cylinder OMCs lose Rs 110 and on a litre of kerosene Rs 11.

"The government had fixed the import parity pricing formulation as the norm for fixation of prices but OMCs have unilaterally imposed the freeze," said a senior executive.

Reliance has already conveyed to the government that it was willing to supply 410,000 tonne of kerosene during the current year provided the issue of pricing was resolved. It has sought that import parity price formulation be applied for the supplies.

Eight per cent of throughput of RIL's Jamnagar refinery is LPG while kerosene is 3.7 per cent.

Reliance had last year supplied 1.1 million tonne of kerosene to OMCs though only 4,00,000 tonnes had been contracted initially.

Gail has claimed that while computing the subsidy burden of Rs 6514 crore, the revised LPG prices payable to the producers of LPG was considered although the prices actually paid were frozen in March 2005.

According to the company, if the revised price is taken into account, OMCs owe Rs 43 crore to Gail.