Kirit Parikh panel report to be submitted today: Oil Secy

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Oil Secretary S Sundareshan said the Kirit Parikh Committee report will be submitted today. The Committee was set up by the Centre to draft a fuel pricing policy. The Oil Ministry is in favour of deregulating petrol and the decision regarding deregulation would be taken after the panel submits its report. However, the final call will be taken by the Prime Minister after considering other factors like inflation and political concerns.

According to him, oil marketing companies may report under-recoveries to the tune of Rs 43,000 crore in FY10. "The options (to compensated OMC) include contribution by upstream, downstream, and a price hike. OMCs will be fully compensated in FY10."

The issue of fuel price subsidy is a contentious one in India. OMCs in India do not have a free pricing mechanism in which prices of fuels like LPG, kerosene, petrol and diesel are decided on the basis of international crude oil costs. Instead, India follows a subsidized fuel pricing mechanism in which these fuels are sold by state-run oil marketing companies at a fixed rate even if international prices of crude go up. As a result, many OMCs sustain losses when selling prices are even lower than production cost.

This move will come as a relief to public sector oil companies as reports had suggested that the Ministry of Finance was in favour of scrapping the practice of issuing oil bonds altogether, leaving OMCs in despair.

Sundareshan said there are clear instructions from Prime Minister Dr Manmohan Singh to process the report swiftly. He stated that rationalisation of gas prices is a high priority.

Here is a verbatim transcript of the exclusive interview with S Sundareshan on CNBC-TV18. Also watch the accompanying video.

Q: Can you confirm these two things for us first whether the report is being tabled today and there is a meeting between the Oil Ministry and the Finance Ministry?

A: I can certainly confirm the first. The Kirit Parikh Committee is likely to submit the report this evening to the Petroleum and Natural Gas Minister Shri Murli Deora. That's probably likely to happen later in the day.

Q: That report, we hear from sources, contains a suggestion that at least petrol might be freed up and that might move towards unregulated pricing. What are your views on that and the likelihood of that happening sometime soon?

A: I am in a dual position. As Secretary in the Ministry of Petroleum and Natural Gas, along with the Minister I will be receiving this report. But I also happen to be a member of the Kirit Parikh Committee, so it will be totally unfair to the other members of the committee to say anything on the content of the report. But I can certainly talk about the issue that's been addressed by the committee. The oil marketing companies, the three of them- Indian Oil Corporation , BPCL and HPCL , are likely to run-up under recoveries of the order of about Rs 43,000 crore in the current financial year. They have to be compensated. Every year we have had different kind of mechanism to compensate the oil marketing companies, the upstream companies- ONGC , Oil India and Gail -chip in with part of the contribution, the government has to contribute the rest.

So if the government is interested in protecting the common consumer, at least in terms of kerosene and liquefied petroleum gas (LPG), ways of subsidizing this have to be form. So this is the broad issue, which the Kiriti Parikh Committee, is addressing and solutions can be many; solutions can be contribution by the upstream companies, contribution by the government or increase in prices or a combination of all of them.