People's Democracy

UNDER-RECOVERIES ON PETRO AND SPECTRUM

Whats Sauce for the Goose

Is Sauce for the Gander

Questioning the double-standards of the government in recovering the under-recoveries on petroleum products and under-recoveries on spectrum, CITU joint secretary, Dipankar Mukherjee has urged upon the prime minister to come clean on this issue. Mukherjee, a former MP and former chairman of Parliamentary Standing Committee on Petroleum and Natural Gas, wrote to the prime minister Dr Manmohan Singh on October 29, 2011 in this regard.

Below we give the full text of the letter.

THIS has reference to Press Information Bureau release dated 18.10.2011 by the Ministry of Petroleum and Natural Gas in the form of a fortnightly statement on under-recoveries on petroleum products.  In element wise explanation of price build up for petroleum products viz diesel, LPG and kerosene, under-recovery to Oil Marketing Companies (OMC), has been officially claimed as “Difference between desired price and actual selling price.”

Desired price (obviously as desired by OMCs and also the private oil companies), for example, for diesel includes the following elements:

·        Free on Board Price of diesel as quoted in Arab Gulf market.

·        Ocean freight.

·        Insurance, ocean loss, port charges.

·        Customs duty

·        Refinery transfer price.

·        Inland freight and delivery charge.

·        Marketing cost including marketing margin.

Desired price is clearly based on the notional price at which diesel would have been imported in the country and not on their actual, ex-refinery price, based on crude oil plus refining cost.  This is in spite of the fact India has abundant refining capacity and hardly 2 per cent to 3 per cent diesel was imported for domestic consumption in 2010-11. The desired price will naturally vary on the basis of changes in the elements, enumerated above.

You will agree, therefore, that under-recovery is a notional figure, and has got no link with the actual loss to an OMC.  Still the government has been trying to recover the desired price from common man based on the notional figure of under-recoveries which is being projected as Rs 70,000 crore to Rs 1 lakh crore by the petroleum ministry.  As a matter of fact you have been also quite forthright in recovering these under-recoveries and the same is being recovered through doses of price hike in petroleum products, with its cascading impact on inflation.

Inexplicably, in the case of 2G spectrum pricing, the revenue loss arrived at by CAG is being brushed aside as notional loss and not as the actual loss. No effort is being made to recover the same.  In the case of 2G spectrum price, you also desired that pricing should be through auction.  Obviously the difference between the desired price through auction and the actual price, at which it was sold, is the under-recovery which should be recovered.  Similarly, this loss due to under-recovery cannot be a specific figure as in the case of petroleum products, depending on the nature of “desired price”.

From the above, it is shockingly clear that two different yard sticks are being applied for recovery of under-recoveries. Under-recovery losses, furnished by OMCs are being treated as sacrosanct for recovery from “Aam Admi”, while a hullabaloo is being created to trash the under-recoveries in 2G spectrum as notional and unacceptable.

I, therefore, urge upon you to kindly ensure recovery of under-recoveries vis-a vis the desired price in sale of spectrum from the corporates immediately as is being done from “Aam Admi” for petroleum products. In case actual loss is the determinant factor, you are requested to roll back the enhanced prices of petroleum products, till the actual losses of OMCs are quantified and verified by CAG for review of petro product pricing.