IMPORT PARITY

The Government has tried to justify the price hike on the plea that as per the policy decision taken during U.F. regime in Sept.'97 the diesel price had been revised from September'97 onwards as per import parity. But, cunningly in the annexure furnished alongwith the note the selling prices of diesel have been shown during this period without indicating simultaneously the corresponding diesel price in the international market. The following table shows the actual picture.

PRICING OF DIESEL

Date of             Diesel         Crude      The basic selling                 The retail selling price including Excise
Price                Price          Price        price excluding                    duties, taxes and local levies (Rs. / 1 Ltr)
Revision          US $           US $        Excise duties and
                      per MT       per           taxes (Rs. /1 ltr)
                                       barrel                                                 Delhi Calcutta Mumbai Chennai
02.09.97        163.15         18.56             8.37                       10.34    10.63     11.53      11.39
07.11.97        167.08       18.74             7.92                               10.29    10.58     11.47      11.34
25.12.97        141.11         18.74             7.99                               10.39    10.68     11.58      11.45
01.03.98        107.10         14.07             7.84                               10.25    10.55     11.43      11.30
04.04.98        121.20         13.36             7.64                               10.01    10.30     11.16      11.04
20.05.98        110.56         13.36             7.54                                9.87     10.16     11.01      10.89
09.01.99          99.36         11.79             6.72                                8.89      9.11     10.04        9.79
28.02.99          83.39         11.79             6.62                                9.94    10.18     11.21      10.91
20.04.99        117.00         16.10             6.88                              10.37     10.52     12.23      11.27
06.10.99        162.10           9.63            13.91                             14.20      16.54    15.24

From the above, it is clear that factually in September'97 international Arab Gulf price of diesel (source-PLATT's) was $163.15 per M.T. It gradually came down to $91.73 in August'98 and to $83.39 in February'99 before it started increasing. The retail sale price, for instance, at Mumbai was Rs. 11.53 per litre in September'97, Rs. 11.01 per litre in August'98, Rs. 11.21 per litre in February'99. Does it show proportionate revision of price as per import parity as per import parity as far as the consumer is concerned? If the average September'99 international price of diesel is around $ 162 per M.T, why should the Mumbai consumer pay Rs. 16.54 per litre when he was paying Rs. 11.53 per litre two years back vis-a-vis the same international price? Similar trend was there in the price of crude in the international market also.

The bluff is clear if one goes through the Budget speech of Finance Minister, Shri Yashwant Sinha, in Parliament on 27.2.99 where it was said:

"Currently, international and domestic prices of crude oil and petroleum products are unusually soft, and it is felt that raising some additional revenue through this commodity would be an equitable method of resource mobilisation. Therefore, I propose an additional duty of Rs. 1 per litre on imported and domestic HSD, the revenue from which will accrue entirely to the Centre."

Thus the Government felt it prudent to charge Rs.1/- extra per litre to the consumer because the prices were low or "soft" and now when the market becomes hard the consumer would again be charged in addition to what he has been charged six months back. Can it be justified under the pretext of import parity?

Interestingly, a duty of Rs.1/- per litre was also levied w.e.f. 2.6.98 as a statutory cess. Therefore, during 1998-99 when the prices of diesel and crude oil were low, the Government had generated a hug surplus as there was no proportionate reduction in the prices to the consumer.

OIL POOL ACCOUNT AND CASH FLOW PROBLEM IN NATIONAL OIL COMPANIES

In the 4^th Report of the Standing Committee on Petroleum (1998-99) presented to the Parliament on 10^th July'98, the same BJP led Government had assured the Committee that from then onwards deficit would not be allowed to occur in the oil pool account.

In the aforesaid note as well as through captive Press, Govt. has talked about the cash flow problem of the national oil companies for importing crude. However, it is this Government, which had forced the three major national oil companies viz. IOC, ONGC & GAIL for cross-holding equity shares among these companies. What it amounted to was-IOC had to pay the Government an amount of Rs. 2475 crores for buying the Government shares in ONGC and GAIL. ONGC had to pay Rs. 1622 crore to the Government for buying Government shares of IOC and GAIL. GAIL had to pay Rs. 400 crore for acquiring shares in ONGC. So, at the cost of these national oil companies, about which the Government is so worried now, the Government of India mobilised more than Rs. 4000 crore to manage its budgetary deficit. All the national oil companies together have paid the Government a dividend of Rs. 1700 crore approximately this year. In the case problems of these companies which were unduly robbed of Rs. 4000 crore by the Government to make up its fiscal deficit, payment of dividend could have been deferred/stopped for this year. Moreover, under the provision of Oil Industry Development Act. 1974, Rs. 31,000 crore had been collected for the purpose of investment in Petroleum sector. Only Rs. 902 crore had been released to OIDB for this purpose. Even CAG had pointed out that as the funds generated from the cess under this Act are largely not being applied for the purpose for which it is being levied, the imposition of cess itself had lost its justification.