Oil majors against pricing policy change

August 19th, 2008 - 4:45 pm ICT by IANS  

New Delhi, Aug 19 (IANS) State-owned oil majors don’t want the petroleum product pricing model to be changed from trade parity to base export parity model as recommended by a high-power committee on fuel pricing, Minister of Petroleum and Natural Gas Murli Deora was told here here Tuesday. At an oil companies CEOs’ conclave chaired by Deora, the oil majors made it clear they are “uncomfortable with moving from state parity to export parity model”, petroleum secretary R.S. Pandey told reporters after the meet.

Trade parity is a mix of import parity and export parity prices, with more weightage given to the former; under import parity, oil price will be equal to the world price plus transport, tariff and other costs the customer would bear if importing.

But under the export parity model, as proposed by the B.K. Chatruvedi committee on fuel pricing, the price is set equal to global rates, minus any transport, tariff (in the destination market) and any other costs the supplier would incur if exporting.

Indian Oil Corp chairman Sarthak Behuria said among other disadvantages, standalone refineries would suffer losses under the export parity model.

The oil companies also did not favour recommendations for monthly price revisions and windfall tax.

ONGC chairman R.S. Sharma said he supported a free and transparent system of deciding the share of the burden of under-recoveries.

“The current system is too ad hoc and poses problems during tax calculation,” he said.

At the meeting, Deora said petroleum products should be “priced in a consistent manner under a long term policy”.

“It is also essential that economic pricing is blended with social responsibility so that the oil sector continues to function and service the oil needs of the economy,” he added.

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