Casting serious doubts at the pricing mechanism of major fuels like petrol, diesel and lPG, the Comptroller and Auditor General (CAG) has come down heavily on the Government, saying that oil marketing purchasing petroleum products from private refineries to bridge their supply gap at import parity price. This, the auditor said, hands out undue financial advantage to entities like Reliance Industries ltd (RIl) and Essar Oil ltd, which was estimated at Rs 667 crore for diesel alone during 2011-12.
While at the same time, the benefit to stand alone state-owned refineries on the same count was Rs 1,428 crore in the same time period, the CAG said in its report titled ‘Pricing Mechanism of Major Petroleum Products in Central Public Sector Oil Marketing Companies’, which was presented in Parliament on Friday. The auditor has suggested that there is scope for negotiation with private refiners to rationalise the contracted price which would benefit oil marketing companies (OMCs).
The Pioneer had exclusively reported on July 19 as to how the national auditor had questioned the pricing mechanism of these essential fuel products, which provided undue benefits to private refiners. The Petroleum Ministry though on its part, had claimed that it makes payments to private refiners at par with that of State-owned refineries. Official sources had told this newspaper that the Petroleum Ministry was hoping that the CAG would be “convinced” by their explanation, however that obviously does not seems to be the case.
Meanwhile, the CAG further elaborated in the report that private refiners export balance petroleum products they produce at prices comparable to export parity price (EPP)/free-on-board (FOB), which are lower than Trade Parity Price (TPP)/import parity price (IPP). “Procurement at TPP/IPP affords an undue benefit to private refiners (RIl and Essar Oil), which was estimated at Rs 667 crore on diesel in only one year i.e. 2011-12,” the reported explained.
The same principal is used to buy fuel from standalone State-owned refineries and the “the benefit to stand alone PSU refineries on the same count was Rs 1,428 crore during 2011-12”. Further pulling up the Government, the auditor said that the Refinery Gate Price (RGP) of essential fuels like petrol and diesel, is calculated by adding various cost elements associated with import of products. In reality though, it noted that it is the crude oil (and not the associated products) that is imported by the refineries.