(a) the basis on which the Government has hiked the prices of petrol and diesel and the reasons
therefor; and
(b) the extent to which public and private companies are likely to be benefited by the hike in
petroleum products prices, company-wise; and
(c) the likely increase in the earning of these oil companies due to the price hike?
MINISTER OF STATE IN THE MINISTRY OF PETROLEUM AND NATURAL GAS(SHRI JITIN PRASADA)
(a): The Government had constituted an Expert Group under the Chairmanship of Dr. Kirit S.
Parikh to advise on a viable and sustainable system of pricing of these petroleum products.
In the light of the recommendations made by the Expert Group, the prices of Petrol and
Diesel have been made market-determined with effect from 26.6.2010. As a result, the price of
Petrol went up by Rs.3.50 per litre. In the case of Diesel, however, it was decided that for
the present, the price would be increased by only Rs.2 per litre. It has also been decided
that in case of a high rise and volatility in the international oil prices, Government will
suitably intervene in the pricing of Petrol and Diesel.
In view of the importance of the household fuels, namely PDS Kerosene and Domestic LPG, the
Government has decided that the subsidies on these petroleum products will continue. However,
to reduce the under-recovery burden of the OMCs, the Government decided to increase the retail
price of PDS Kerosene by only Rs.3 per litre and that of Domestic LPG by only Rs.35 per
cylinder (at Delhi), with corresponding increases in the rest of the country. This is against
the required increase of Rs.18.82 per litre in PDS Kerosene and Rs.261.90 per cylinder in
Domestic LPG.
The primary objective behind the pricing reforms undertaken by the Government is the growing
imperative for fiscal consolidation, the need for reducing the subsidy burden on petroleum
products so as to allocate more funds to social sector schemes for the common man, and for
ensuring country’s energy security in the long term. Market-determined pricing of Petrol and
Diesel is expected to induce market competition, encourage Oil Marketing Companies to reduce
cost, improve efficiency and enhance service standards and thereby provide greater benefit to
the consumers.
(b)&(c): During the year 2010-11, the under-recoveries of the Public Sector Oil Marketing
Companies (OMCs) on the sale of sensitive petroleum products were estimated at about Rs.72,000
crore, assuming an annual average price of the Indian Basket of crude oil at $ 75 per barrel.
After the recent increases made in the retail prices of the four sensitive petroleum products,
the under-recoveries of the OMCs have been estimated at about Rs.53,000 crore, assuming an
annual average price of the Indian Basket of crude oil at $ 75 per barrel.
As regards the private companies, Government does not monitor their profits as they are free to
fix the prices of their petroleum products on commercial considerations.