Almost a year after Government made diesel prices for bulk consumers market linked, it is now considering a roll back for State Transport Undertakings.
Petroleum Secretary Vivek Rae told mediapersons on the sidelines of a CII Business Partners conference here on Thursday that the significant drop in bulk diesel sales has led the Government to consider a partial roll back in bulk diesel pricing for this category.
The fall in the share of bulk diesel is mainly due to very limited purchases by the State Transport Undertakings and by industries such as civil construction, cement, mining, steel, etc., who buy directly from the retail outlets at subsidised rates or have shifted to cheaper alternative fuels. The other major bulk consumers are the Railways and Defence.
The Government on January 18, 2013 had deregulated diesel sales for direct/bulk consumers buying the product directly from oil companies. The share of direct/bulk sales to total sales, which was about 18 per cent in 2011-12 and 16.8 per cent in December, 2012, declined to around 10 per cent in November, 2013, according to the Petroleum Planning & Analysis Cell (PPAC).
The public sector oil retailers have been maintaining that dual pricing is not good in a large system like ours. However, it could be argued that this is not dual pricing, as bulk sale can be treated as a separate category.
State Transport Corporations were tying up with retail outlets as there is a price differential of almost Rs 10 a litre between diesel sold at depots and retail outlets. There was no way to stop this. Since the difference is so huge now, there is always an incentive for them to buy from retail outlets.
The companies have brought it to the notice of the Government to see if this can be stopped by way of law.
After a declining trend for five consecutive months during the current fiscal, diesel consumption according to PPAC has recorded a marginal growth of 0.1 per cent in November 2013, and a cumulative decline of (-) 0.7 per cent during April-November 2013. The consumption figures for December will be available around January 22.
The Secretary said that his Ministry is examining the recommendations made by the Kirit Parikh committee report on pricing of petroleum products. The proposal to bring back some categories of bulk diesel consumers into controlled retail rates is also being considered along with the committee report.
The Ministry is hoping to approach the Cabinet soon on oil subsidies and contribution made by oil companies.