Impeding the finance ministry's move to slash subsidises by changing the fuel pricing norm, Oil Minister M Veerappa Moily said government not compensating state-owned oil firms for their losses, will put question mark on their survival. 'From 2005-06, the oil marketing companies have not been adding any margin on crude oil or on petroleum products. What is import price plus transportation and taxes are all that is there in the selling price', he said.
Rather than current practice of pricing the fuels after adding transportation and customs duty to the international price, the finance ministry wants petrol and diesel to be priced at a rate, the oil firms get in the export market. Three OMCs - IOC, BPCL and HPCL are together expected to end the fiscal with a revenue loss of Rs 163,000 crore in current financial year and of this the finance ministry wants to cut off Rs 17,000 crore by changing methodology to export parity pricing (EPP).
As per the Oil Minister, if this pricing norm is followed, then the oil firms won’t get funds for expansion and modernization of refineries. By adding further, he said ‘this is a matter of great concern because overall oil import is 84 per cent of our requirement and no country can survive if these (oil) companies cannot survive. We need to modernize refineries for which surplus needs to be generated.’
Traditionally, domestic refiners like any other product, enjoyed 5 percent duty protection on petroleum products (finished product) and crude oil (raw material). However, few years back, the duty on crude oil was brought to zero and that on products to 2.5 percent, which have reduced the protection of domestic refiners enjoyed from flooding of domestic market with cheaper imported fuel. Now, if the import duty on fuel is brought down to zero, Indian refineries will have no protection.
