STATEMENT OF PETROLEUM MINISTER ON CALLING ATTENTION MOTION IN RAJYA SABHA
Shri Murli Deora, Minister of Petroleum & Natural Gas has said that the Government is monitoring the international oil prices closely and will take appropriate pricing decisions to protect the interest of the common man particularly the vulnerable sections of the society. He stated that the oil PSUs are the backbone of the country’s energy security and their sound financial health is a pre-requisite for ensuring smooth and uninterrupted distribution of the essential fuels across the country. Making a statement on a Calling Attention Motion in the Rajya Sabha today he said that even after the price increase on 2nd July, the public sector Oil Marketing Companies (OMCs) are suffering under-recoveries on petrol and diesel based on the Refinery Gate Price (RGP) of 16.7.2009. The price of petrol after revision(ex-Delhi) at Rs. 44.63 per litre is lower than that in June 2006 i.e. Rs. 47.15 per litre while the price of diesel is more or less at the level of June 2006.
The Minister pointed out that a major portion of international oil prices is borne by the Government through issuance of oil bonds and upstream oil PSUs through price discounts on crude oil/products. Responding to the queries of the Members Shri Deora stated that the little increase in the international prices affect us as we import 75% of our crude oil requirements. He emphasized that Government waited for about one month after the global prices increased to around $ 70 per barrel. He further said that the Government is never happy to increase the price of these products and assured that if the prices go down and stabilize the benefit will be passed on to the consumers.
The Minister of State for Petroleum & Natural Gas Shri Jitin Prasada also informed that the Government has reduced central duties during the period 2004-2008. He clarified while responding to the suggestion to switch-over to cost plus mechanism that such a proposal also as on date entail price increase on petrol and diesel. As far as components of taxes in the retail price of petrol and diesel are concerned, Shri Prasada informed that state taxes were also sizeable part of it and they have been requested to rationalize the sales tax. Following is the uncorrected text of statement made by the Minister of Petroleum and Natural Gas Shri Murli Deora at the start of debate on the Calling Attention Motion in the Rajya Sabha in respect of hike in prices of petrol and diesel and pricing policy of petroleum products:
“Over the last six months or so, international oil prices have been on the rise. The Indian Basket of crude oil, which averaged $ 40.61 per barrel in December 2008, rose to $69.12 per barrel in June, i.e. by about 70% in June 2009.
Although the international oil prices have shown a small reduction during the first fortnight of July 2009, the prices have again started rising during the second fortnight and the average price of the Indian basket during July 2009 (upto 17.07.2009) is $63.22/barrel.
The Public Sector Oil Marketing Companies’ (OMCs) under-recoveries on the sale of four sensitive petroleum products, on 1st July 2009, were projected to be Rs. 4,870 crore, for the month of July 2009. Government was constrained to increase the price of Petrol by Rs.4/litre and Diesel by Rs.2/litre, with effect from 2.07.2009. This price increase, along with the reduction in international oil prices during July 2009 has helped to reduce the under-recoveries estimated for the month of July 2009, from Rs. 4,870 crore to around Rs. 2,880 crore.
However, even after the price increase on 2.07.2009, the OMCs are still suffering under-recoveries on Petrol and Diesel of Rs. 1.01/litre and Re.0.02/litre respectively (based on the Refinery Gate Price (RGP) of 16.07.2009). It is worthwhile to mention that even after the recent price increase, retail selling price of Petrol (ex-Delhi) at Rs. 44.63/litre is lower than the price prevailing in June ’06, i.e. Rs. 47.51/litre. The retail selling price of Diesel is more or less at the level of June 2006. There has been no increase in the retail selling price of PDS Kerosene.
To protect the consumer from the inflationary impact of rising international oil prices, Government has been modulating the retail prices of sensitive petroleum products; viz. Petrol, Diesel, PDS Kerosene and Domestic LPG. Under the burden sharing mechanism in vogue, the major portion of the burden of international oil prices is borne by the Government through issuance of Oil Bonds, and upstream oil PSUs through price discounts on crude oil/products. During 2008-09, the Government sanctioned Oil Bonds of Rs. 71,292 crore and the upstream oil PSUs contributed Rs. 32,000 crore by way of discounts towards under-recoveries of the OMCs. In addition, the upstream oil PSUs namely ONGC and OIL contributed Rs. 943 crore through price discounts to OMCs to compensate them for their import losses.
The OMCs’ financial health is a matter of concern to the Government. The OMCs’ under-recoveries have compelled them to borrow heavily, to meet their cash flow requirements. As compared to the total borrowings of Rs. 66,900 crore as of March 2008, OMCs’ borrowings ballooned to Rs. 1,07,115 crore on 31.12.2008, thereafter falling to Rs. 88,900 crore in March 2009. During 2008-09, the OMCs’ interest burden increased to Rs. 8,201 crore as against Rs. 3,016 crore during the previous year, making a serious dent on their profitability.
To meet the hydrocarbon needs of the nation, the three OMCs have projected capital investments of Rs. 17,247 crore during 2009-10 in refineries, Green Fuel projects, marketing infrastructure. The upstream oil PSUs, too, have ambitious investment plans for exploration and production of oil and gas. Taken together, the annual plan outlay of oil PSUs during 2009-10 is of the order of Rs. 57,475 crore. The oil PSUs will not be in a position to carry out these Capex programmes during the year as planned, if their financial health is not sound. The oil PSUs are the backbone of the country’s energy security and their sound financial health is a pre-requisite for ensuring smooth and uninterrupted distribution of the essential fuels across the country.
It needs mention that having regard to the need to provide relief to the poor and the middle classes, Government has decided not to increase the retail prices of PDS Kerosene and Domestic LPG. On the basis of the RGP effective 1/7/2009, Government is bearing a burden of Rs. 15.26 on each litre of PDS Kerosene and Rs. 92.96 on each cylinder of Domestic LPG. To ensure uninterrupted supply of these two products at subsidized prices, Government’s subsidy burden (considering an average crude oil price of $70 per barrel), is projected to be over Rs. 30,000 crore in 2009-10. The retail price of PDS Kerosene has not been revised since March 2002.
The State Governments are levying very high rates of Sales Tax/VAT on Petrol & Diesel. The Ministry of Petroleum & Natural Gas has recently requested all Chief Ministers and the Finance Minister of West Bengal, as the Chairman of the Empowered Committee of State Finance Ministers, on the urgent need to rationalize the Sales Tax on Petrol and Diesel, so as to reduce the impact of rising international oil prices on the consuming public.
Government is monitoring the international oil prices closely and will take appropriate pricing decisions to protect the interest of the common man particularly the vulnerable sections of the society”.
Shri Murli Deora, Minister of Petroleum & Natural Gas has said that the Government is monitoring the international oil prices closely and will take appropriate pricing decisions to protect the interest of the common man particularly the vulnerable sections of the society. He stated that the oil PSUs are the backbone of the country’s energy security and their sound financial health is a pre-requisite for ensuring smooth and uninterrupted distribution of the essential fuels across the country. Making a statement on a Calling Attention Motion in the Rajya Sabha today he said that even after the price increase on 2nd July, the public sector Oil Marketing Companies (OMCs) are suffering under-recoveries on petrol and diesel based on the Refinery Gate Price (RGP) of 16.7.2009. The price of petrol after revision(ex-Delhi) at Rs. 44.63 per litre is lower than that in June 2006 i.e. Rs. 47.15 per litre while the price of diesel is more or less at the level of June 2006.
The Minister pointed out that a major portion of international oil prices is borne by the Government through issuance of oil bonds and upstream oil PSUs through price discounts on crude oil/products. Responding to the queries of the Members Shri Deora stated that the little increase in the international prices affect us as we import 75% of our crude oil requirements. He emphasized that Government waited for about one month after the global prices increased to around $ 70 per barrel. He further said that the Government is never happy to increase the price of these products and assured that if the prices go down and stabilize the benefit will be passed on to the consumers.
The Minister of State for Petroleum & Natural Gas Shri Jitin Prasada also informed that the Government has reduced central duties during the period 2004-2008. He clarified while responding to the suggestion to switch-over to cost plus mechanism that such a proposal also as on date entail price increase on petrol and diesel. As far as components of taxes in the retail price of petrol and diesel are concerned, Shri Prasada informed that state taxes were also sizeable part of it and they have been requested to rationalize the sales tax. Following is the uncorrected text of statement made by the Minister of Petroleum and Natural Gas Shri Murli Deora at the start of debate on the Calling Attention Motion in the Rajya Sabha in respect of hike in prices of petrol and diesel and pricing policy of petroleum products:
“Over the last six months or so, international oil prices have been on the rise. The Indian Basket of crude oil, which averaged $ 40.61 per barrel in December 2008, rose to $69.12 per barrel in June, i.e. by about 70% in June 2009.
Although the international oil prices have shown a small reduction during the first fortnight of July 2009, the prices have again started rising during the second fortnight and the average price of the Indian basket during July 2009 (upto 17.07.2009) is $63.22/barrel.
The Public Sector Oil Marketing Companies’ (OMCs) under-recoveries on the sale of four sensitive petroleum products, on 1st July 2009, were projected to be Rs. 4,870 crore, for the month of July 2009. Government was constrained to increase the price of Petrol by Rs.4/litre and Diesel by Rs.2/litre, with effect from 2.07.2009. This price increase, along with the reduction in international oil prices during July 2009 has helped to reduce the under-recoveries estimated for the month of July 2009, from Rs. 4,870 crore to around Rs. 2,880 crore.
However, even after the price increase on 2.07.2009, the OMCs are still suffering under-recoveries on Petrol and Diesel of Rs. 1.01/litre and Re.0.02/litre respectively (based on the Refinery Gate Price (RGP) of 16.07.2009). It is worthwhile to mention that even after the recent price increase, retail selling price of Petrol (ex-Delhi) at Rs. 44.63/litre is lower than the price prevailing in June ’06, i.e. Rs. 47.51/litre. The retail selling price of Diesel is more or less at the level of June 2006. There has been no increase in the retail selling price of PDS Kerosene.
To protect the consumer from the inflationary impact of rising international oil prices, Government has been modulating the retail prices of sensitive petroleum products; viz. Petrol, Diesel, PDS Kerosene and Domestic LPG. Under the burden sharing mechanism in vogue, the major portion of the burden of international oil prices is borne by the Government through issuance of Oil Bonds, and upstream oil PSUs through price discounts on crude oil/products. During 2008-09, the Government sanctioned Oil Bonds of Rs. 71,292 crore and the upstream oil PSUs contributed Rs. 32,000 crore by way of discounts towards under-recoveries of the OMCs. In addition, the upstream oil PSUs namely ONGC and OIL contributed Rs. 943 crore through price discounts to OMCs to compensate them for their import losses.
The OMCs’ financial health is a matter of concern to the Government. The OMCs’ under-recoveries have compelled them to borrow heavily, to meet their cash flow requirements. As compared to the total borrowings of Rs. 66,900 crore as of March 2008, OMCs’ borrowings ballooned to Rs. 1,07,115 crore on 31.12.2008, thereafter falling to Rs. 88,900 crore in March 2009. During 2008-09, the OMCs’ interest burden increased to Rs. 8,201 crore as against Rs. 3,016 crore during the previous year, making a serious dent on their profitability.
To meet the hydrocarbon needs of the nation, the three OMCs have projected capital investments of Rs. 17,247 crore during 2009-10 in refineries, Green Fuel projects, marketing infrastructure. The upstream oil PSUs, too, have ambitious investment plans for exploration and production of oil and gas. Taken together, the annual plan outlay of oil PSUs during 2009-10 is of the order of Rs. 57,475 crore. The oil PSUs will not be in a position to carry out these Capex programmes during the year as planned, if their financial health is not sound. The oil PSUs are the backbone of the country’s energy security and their sound financial health is a pre-requisite for ensuring smooth and uninterrupted distribution of the essential fuels across the country.
It needs mention that having regard to the need to provide relief to the poor and the middle classes, Government has decided not to increase the retail prices of PDS Kerosene and Domestic LPG. On the basis of the RGP effective 1/7/2009, Government is bearing a burden of Rs. 15.26 on each litre of PDS Kerosene and Rs. 92.96 on each cylinder of Domestic LPG. To ensure uninterrupted supply of these two products at subsidized prices, Government’s subsidy burden (considering an average crude oil price of $70 per barrel), is projected to be over Rs. 30,000 crore in 2009-10. The retail price of PDS Kerosene has not been revised since March 2002.
The State Governments are levying very high rates of Sales Tax/VAT on Petrol & Diesel. The Ministry of Petroleum & Natural Gas has recently requested all Chief Ministers and the Finance Minister of West Bengal, as the Chairman of the Empowered Committee of State Finance Ministers, on the urgent need to rationalize the Sales Tax on Petrol and Diesel, so as to reduce the impact of rising international oil prices on the consuming public.
Government is monitoring the international oil prices closely and will take appropriate pricing decisions to protect the interest of the common man particularly the vulnerable sections of the society”.
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