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Energy pricing set for overhaul, likely after polls

The stage is set for the government to usher in some major reforms in the energy pricing including that of petroleum products and natural gas. Anupama Airy reports.

business Updated: Sep 22, 2009 23:27 IST
Anupama Airy

The stage is set for the government to usher in some major reforms in the energy pricing including that of petroleum products and natural gas. As this would mean taking some harsh decisions, the government is waiting for the forthcoming elections in some major states like Maharashtra and Haryana to get over.

A senior official in the petroleum ministry told The Hindustan Times that the ministry has already prepared a cabinet note for increasing the administered prices of natural gas produced by state-owned companies like ONGC and OIL and is awaiting the report of the five member task force under the chairmanship of Kirit Parikh to make petro prices sustainable. The RBI has also pushed for rationalising fuel prices.

The Planning Commission, the official said, agreed that a roadmap be finalised to bring the existing prices of all tradable commercial energy sources in line with the market prices. The list of commodities include petrol, diesel, LPG (cooking gas) and kerosene besides that of coal and natural gas produced by state-owned oil companies.

“Very soon steps will be initiated to correct the anomalies in the pricing of gas and petroleum products,” he said.
ONGC and OIL are forced to sell natural gas at a administered price of around $2 per unit (Rs 98 per unit) as against the market price of anywhere up to $6 to 7 (Rs 294 to Rs 343) per unit. Even the government approved price of gas (produced or Reliance’s KG-D6 gas fields) is $4.2 (Rs 205.8) per unit.

Petrol and diesel are currently being sold at a loss of Rs 4 per litre and Rs 2.77 per litre, respectively.
Losses are even higher in the case of cooking fuels. Kerosene is being sold at a loss of Rs 16.41 per litre while in case of LPG (14.2 kg), the subsidy given is Rs 153 per cylinder.

For the first six months of the current financial year, the under-recoveries of oil companies are estimated at Rs 16,388 crore for which the government has agreed to compensate Rs 10,000 crore by issuing oil bonds.

A consensus to make petroleum aligned to market forces was reached at the recent meeting of the full Planning Commission, the official said.

“The private players are forced to stay out of the sector and there is virtually no competition,” the official said.

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