Review Petro Pricing

CPI(M) MP Writes To PM

Dipankar Mukherjee, CPI(M) MP and member of parliamentary standing committee on petroleum and chemicals, has written the following letter to the prime minister Manmohan Singh on November 16. While requesting the prime minister to reconsider the price hike, Mukherjee asked for a total review of the pricing of petroleum products:

FURTHER to my letter dated November 4, 2004 opposing the hike in price of petroleum products, I invite your kind attention to the following issues, keeping in view your perception, as reported in the media about the “painful decision”, which in my opinion was avoidable.

IMPORT DUTY ON CRUDE OIL

You may recall that in response to your starred question No 41 dated November 21, 1997, in Rajya Sabha, the then minister of petroleum & natural gas of United Front government, had committed a time-bound roadmap for duty restructuring before dismantling administered pricing mechanism. The duty restructuring was based on the recommendations of Expert Technical Group and the House was assured that import duty on crude would be 0-5 per cent in 2001-2002. The previous government did not adhere to this commitment and the UPA government instead of correcting the same has formed another committee to study the duty structure. I feel, if a review is now found necessary for import duty reduction after seven years, then the logic of global parity in petroleum sector and decision to dismantle APM should also be reviewed.

Incidentally, the duty reduction from the present 10 per cent to 5 per cent means a relief of nearly Rs 5,000 crore a year to public sector oil companies.

CESS ON OIL PRODUCED BY ONGC AND OIL   

As you are kindly aware, a cess on oil produced by ONGC and Oil India Ltd (other than NELP blocks) at the rate of Rs 1,800 per tonne is being charged as per the Oil Industry (Development) Act, 1974. The annual collection of about Rs 5,400 crore is not being utilised for the petroleum sector. As ONGC and Oil are also to charge their crude oil on the basis of the global parity, there had been a consistent demand since the opening up of petroleum sector for withdrawal of the cess. But instead, the previous government had increased the cess from Rs 900 per tonne to Rs 1,800 per tonne. Apart from the burden of Rs 5,400 crore to public sector oil companies, this also denies level playing field to exploring PSUs, as cess is not charged on oil producing companies in private sector. This cess should be immediately withdrawn.

CONCESSION TO EXPORTERS OF PETROLEUM PRODUCTS

Exporters enjoy a duty drawback on their crude imports. About 14 million tonnes of petroleum products are expected to be exported this year. As per rough estimates, revenue loss on this account is roughly about Rs 800 crore on an annualized basis. Ironically, the largest exporter is the biggest stand-alone refinery at Jamnagar earning disproportionately high refining margin of 11 to 12 dollars per barrel as a windfall of the global price hike. Unfortunately, concession to the biggest corporate continues as “incentive” while any concession to the common man is ridiculed as “subsidy.”

It could be seen that the above (5,000 cr + 5,400 cr + 800 cr = Rs 11,200 crore) along with recommendation of the parliamentary standing committee on petroleum & natural gas on duty restructuring take care of the subsidy figures floated day in and day out by the corporate media, without remotely touching the profitability of public sector oil companies.

I am afraid under the cover of public sector oil sector companies, there is a planned attempt to cover up the super profiteering, through high refining margin, import duty exemption, sale tax holiday etc by the biggest stand-alone private sector refinery in the country.

I, therefore, earnestly request you to reconsider the price hike and review the pricing of petroleum products in totality. (INN)