Hike in petroleum products by the government of India hiding behind Oil Marketing Company (OMC) proxies is ironic. The government, through OMC’s claims massive under recoveries and then accepts huge dividend cheques year after year.
Cost of petroleum products mainly depends upon the price of crude oil, which constitutes over 90% of the total cost of petroleum products. India imports about 83% of its crude oil requirements, the international oil prices necessarily have a bearing on the domestic prices of petroleum products. On 1.04.2002, the Administered Pricing Mechanism (APM) for petroleum products was dismantled and it was decided that the pricing of all petroleum products, except PDS Kerosene and Domestic LPG, would be market-determined. Since 2004-05, the Government started modulating the retail selling prices of the four sensitive petroleum products; namely Petrol, Diesel, PDS Kerosene and Domestic LPG sold by the three Public Sector OMCs to protect the consumer from the inflationary impact of rising international oil prices. In the light of the recommendations made by the Expert Group set up to advise on a viable and sustainable system of pricing of petroleum products under the Chairmanship of Dr. Kirit S. Parikh, the price of Petrol has been made market-determined with effect from 26.6.2010.
The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas analyses the price of the petroleum products. The OMC’s have reported under recoveries of Rs 78190 Crores in 2010-11. In 2012 it was Rs 134,541 Crores. Finally, the April – June 2012 data shows that the underrecoveries were Rs 47,811 crores.
Logically, these companies should be bleeding in red, which is not so. The oil and natural gas giant, ONGC, declared a net profit of Rs. 25,123 crores for the year 2011-12. For the next quarter ending June 30, 2012, it has reported a further growth in profit of 48.4 per cent. The Indian Oil Corporation Ltd (IOC) has reported a net profit of Rs. 4,265.27 crores for 2011-12. The Hindustan Petroleum Corporation Ltd (HPCL) reported a net profit of Rs. 911 crores. Interestingly, for the last quarter of the fiscal, January-March 2012, its net profit increased by 312 per cent. The Bharat Petroleum has reported a net profit of Rs. 1,546.68 crores.