Excl: Why Kirit Parikh wants fuel prices freed

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Parikh panel for total deregulation of petrol, diesel price

The Kirit Parikh panel submitted its much-awaited report on fuel pricing to the oil ministry yesterday. The report has suggested, among other things, complete deregulation of petrol and diesel prices.

 

In an exclusive interview with CNBC-TV18, Dr Kirit Parikh, Chairman of Committee on Pricing Petroleum Products, discusses the report.

 

Here is a verbatim transcript of the exclusive interview with Dr Kirit Parikh on CNBC-TV18. Also watch the accompanying video.

 

Q: One observation is that the name of GAIL has been left out of the upstream company subsidy sharing plan, is that done deliberately that the committee recommends that GAIL should not like ONGC or Oil India bear any part of the subsidy?

 

A: GAIL is not really an upstream company; it is not exploring or producing gas. It is really a distribution company, so we have deliberately left it out.

 

Q: Is it the recommendation of the panel that GAIL be completely removed now from any kind of subsidy burden sharing or do you see it more likely in that GAIL has some kind of progressive lowering of burden over the next few months?

 

A: We have not said anything about that GAIL should be left out or not. We have merely said that you should collect this additional profit, share of the additional income, obtained by ONGC from the blocks, which were allocated to them in a pre-NELP (New Exploration Licensing Policy) round on a nomination basis. So the implication certainly is that GAIL is not included here.

 

Q: Aside from the deregulation of diesel, the report has also recommended an extra excise of Rs 80,000 on diesel driven vehicles, there was some concern about what kind of impact this may have on inflation levels generally?

 

A: This is not on all diesel driven vehicles; it is only on diesel driven cars. We have differential excise on petrol and diesel. That is because we think petrol car drivers are using it as a luxury product and that there should be a higher tax on that. When a person who drives a diesel car he is escaping that tax that is put on the petrol driven vehicles. We are merely saying that the differential of the tax over the lifetime of ten years of the car that a person avoids by driving a diesel vehicle, if he were to drive the same number of kilometers as a petrol driven car, that should be collected as an upfront excise and appraised in discounted value sense.

 

Q: The formula that you have recommended for profit sharing, if worked backwards actually works out to very high realizations of ONGC even with the formula that you are proposing?

 

A: That is in a sense that you want ONGC to have the resources to invest, to expand, to develop, to explore and to increase production. If you put in anything more than that, you would certainly wind up creating an unlevel playing field for public and private sector in a reverse way.