Petroleum Secretary, Vivek Rae on Thursday said the Ministry would take before the Cabinet the Kirit Parikh panel suggestions for a higher monthly hike in diesel prices but at the same time hinted at a partial rollback of bulk diesel pricing impacting the state transport undertakings (STUs).
Talking to reporters on the sidelines of the CII-sponsored summit in the run up to Petrotech 2014, Mr. Rae said the government would be soon circulating the Kirit Parikh Committee report for Inter-Ministerial consultations and the suggestions for higher does of diesel prices would form part of that.
"The issue of subsidy sharing regime would also be put up before the Cabinet for consideration to ensure that upstream companies get about $65 per barrel on sale of crude oil which currently stands at $40 to 40 per barrel. This would mean that we would be able to initiate more exploration activities. While we are buying crude oil at $110 a barrel, domestic companies should get at least $65 a barrel for invest in future exploration activities," he added.
The move would be a huge relief for upstream oil companies like Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL). The Parikh panel had also suggested that GAIL India be kept out of the subsidy sharing mechanism. The panel had recommended Rs. 5 hike on diesel prices, Rs. 250 a cylinder increase in the price of domestic cooking gas and Rs. 4 a litre in kerosene oil with immediate effect.
In order to put in place a robust subsidy sharing mechanism, the Ministry plans to put before the Cabinet a proposal that upstream companies must be given an assured $65 a barrel on supply to state-run oil-marketing companies (OMCs). Beyond $65 and up to $100 a barrel, they would have to offer an 85 per cent discount. If the oil price went past $100, the discount would be 90 per cent on what they earned above $65. The Parikh committee had suggested a slab-based formula for upstream share in subsidy.
In January last year, the government had gone in for partial deregulation of diesel price allowing a hike of 50 paise a litre per month for retail customers and nearly Rs. 11 for bulk consumers. The decision on diesel was expected to bring down the subsidy bill by Rs. 12,900 crore on account of hike in price of fuel sold to bulk consumers like Railways and STUs. The government had gone for dual pricing system for bulk and retail customers last year. Since then, the sales of bulk diesel had gone down from 18 per cent of the overall diesel sales to 10 per cent. Currently, all STUs are depending on retail outlets for the needs.
