Return
to Story Page
To print: Select File and then Print from your
browser's menu
Madhumita Chakraborty
New Delhi, Dec 20: Union petroleum minister VK Ramamurthy has a new year gift up his sleeve in the form of a significant slash in diesel prices.The price of high-speed diesel was last reduced in May this year. Since then, diesel prices have turned many times cheaper in the international market, but the benefits have been stashed away at the oil pool account.Now that the account has a healthy surplus and half of oil companies' dues have been paid off (by redeeming oil bonds), Ramamurthy feels it is time to share the booty with the consumer as well. ``The people may get a new year gift,'' the minister said, when prodded on the centre's commitment to provide ``import parity'' in diesel prices.
Taking a cue from sliding crude oil prices, prices of diesel have tumbled worldwide in the last few months. The monthly average of the Arab Gulf price of high speed diesel was $13.73 to a barrel in October.
In November, the average diesel price dropped to $12.24 a barrel and the average so far this month is $10.8 abarrel. The average of the Dubai crude price for the same period is $9.93 a barrel, or barely a few cents less than the price of diesel.
The fuel for power generation and transportation, incidentally, comprises almost 45 per cent of the 80 million tonne of petroleum products sold within the country. The truckers' fuel has turned cheaper four times and dearer only once, since policy-makers decided on an adjusted import parity in the price of diesel in September last year.
The union government also decided to withdraw the Rs 2 per litre subsidy in the price of diesel. Adjusted import parity allows the Oil Coordination Committee, which monitors the oil pool account, to use some of the gains from low import price of diesel as cross-subsidy.
The centre subsidises the consumer price of liquified petroleum gas (LPG) and kerosene by making consumers of motor spirit (MS), aviation turbine fuel and to some extent diesel, pay more. Ramamurthy said most benefits of the drop in the global price of diesel had beenpassed on to consumers and more would follow.
Diesel prices were pegged down each time import prices came down, except in December last year, when the centre blamed the 10 paise hike in the consumer price on the ``keen exchange rate fluctuation.'' The exchange rate fluctuations between April and September this year resulted in an additional drain of foreign exchange worth Rs 730.64 crore.
Even so, the combined impact of the low crude prices for refineries and the low import price of diesel must have meant sufficient surpluses at the pool account to enable the centre to pass on some of it to consumers. The 14 refineries in the country produce close to 23.35 million tonne of high speed diesel (HSD).
Nearly 40 per cent of 36 million tonne of diesel consumed in India is imported. Last year, canalising agency Indian Oil Corporation (IOC) imported more than 14 million tonne of diesel worth Rs 8,586.97 crore.
The year before, in 1996-97, the country's total diesel imports of 13.6 million tonne had cost Rs10,087.21 crore. In 1995-96, the 12.85 million tonne canalised diesel imports had cost the national exchequer Rs 7,760.78 crore in foreign exchange.
The 1996-97 diesel prices were impacted by an upwardly mobile crude oil price and a downwardly mobile rupee. The rupee downslide took a more frenzied turn in the last quarter of last year, but so did oil prices in the global markets.
After steadying at close to $18 to a barrel, crude prices began to flounder in December last year after OPEC (the Organisation of Petroleum Exporting Countries) turned up its taps. Prices of petroleum products followed suit and sometimes outpaced the actual dip in crude prices because (as an industry source pointed out succinctly) product prices have more to do with demand than supplies.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------