A fortnightly or monthly revision in diesel prices by only Re 1 a litre in tandem with international prices may sound like music to public sector oil marketing companies, but not so for the consumers.
An official panel working on ‘Policy Options for Diesel Pricing’ has suggested that “while considering pass-through of higher global prices, increase in fortnight/month should be restricted to Re 1.”
It has also suggested that the Government should announce an upfront per litre subsidy for diesel applicable for a particular level of global crude/diesel prices.
The panel has proposed that the maximum retail price for diesel at the depots for particular levels of global crude/diesel prices should be announced.
In a booster for private sector players such as Reliance Industries and Essar Oil, the panel also suggests that the per litre subsidy should be available to all oil marketing companies — the Government could consider providing subsidy to private players on their delivery of the product to PSU oil retailers.
Free of duties
On the duty front, it has suggested that there should be neither customs nor excise duties on diesel. Appropriate funding could be made for National Highways Authority of India, which currently receives the earmarked diesel cess, it says.
As regards trade parity pricing, the ratio of import parity and export parity may be changed to 60:40 from the current 80:40. The panel also talks about incentivising the use of other fuels by bulk users, including the Railways and Defence.
Selling petroleum products at a controlled price meant the oil companies incurred under-recoveries. The under-recovery on diesel as on the second fortnight of June stood at Rs 10.20 a litre.
With the softening of global crude prices, industry observers say the time is right for taking a decision on petroleum product pricing.
Indications are that the companies may consider reducing petrol prices by the end of this fortnight (June 30).
The price at which Indian refiners buy their crude increased to $90.75 /barrel on June 26.