Committee on Oil Price

The committee of experts constituted by the government on the instructions of Supreme Court to revise the oil pricing mechanism has decided to present a two-point report to the court for guidance, or decision, as all its computations require increase in prices to offset the ‘negative margins’ of refineries.

Members of the committee and representatives of the oil industry had failed to work out a consensus formula on oil pricing because of the negative margins and partial capacity utilisation by refineries.

“Even to neutralise the negative margins of the refineries, the product prices need to be increased rather than reduced, as desired by the apex court,” the official said.

He said the financial position and negative margins of the refining industry on the basis of the actual cost would be presented to the court with two options for a decision.

The first option, he said, was to completely deregulate the petroleum products and let the market forces determine their prices. Under this option, the product prices were likely to go up significantly.

Under the second option, the court would give instructions to reduce the rate of general sales tax and petroleum levy or abolish one of them.The official, involved in the review process, said the ministry of finance had declined to reduce or abolish GST and petroleum levy because of the IMF programme and rising fiscal pressures. It had taken the stand that the taxes had been imposed by parliament which alone had the powers to change tax measures.

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