Reports indicate that the union petroleum ministry adopted the terms of reference proposed by the finance ministry for the committee set up under former Planning Commission member Kirit S Parikh.
Originally, the oil ministry had proposed that the committee be asked ‘to revisit the current pricing methodology of import parity or trade parity’ for petroleum products.
But Finance Minister P Chidambaram wanted the panel
to suggest a model based only on export parity pricing.
Following this, the petroleum ministry adopted this terms of reference, reports indicate.
Presently, under-recoveries of state-run oil marketing companies (OMCs) are determined based on the import parity or trade parity’ pricing methodology.
But the finance ministry wants OMCs to be paid the equivalent of rates they would have realised if diesel, kerosene and LPG were exported.
Adopting export parity pricing mechanism would have reduced last fiscalÂ’s subsidy bill of Rs 161,029 crore by Rs 17,618 crore.
But Petroleum Minister M Veerappa Moily thwarted the move by seeking the Prime Minister’s intervention and promising to get the pricing issue looked at by the expert committee under Parikh.
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