Chidu, PMO & Moily to decide export parity pricing on Tue

Finance minister P Chidambaram, petroleum minister Veerappa Moily and the PMO will meet on Tuesday to decide on the export parity pricing of petroleum products, reports CNBC-TV18's Nayantara Rai, quoting sources. The finance ministry has been keen on this meeting and stated that it will not give any more cash to oil marketing companies (OMCs) unless they give up the practice of following trade parity.

Also Read: Oil Ministry recommends natural gas price hike to $6.7 For the last several months, the finance ministry has been demanding oil companies to move towards export parity – away from trade parity.  The proposal was rejected by the oil ministry on grounds that the OMCs would lose too much money and that their balance-sheets would be severely weakened. The underrecoveries for FY13 alone are projected to be at Rs 1.65 lakh crore. The finance ministry’s argument is that if OMCs were to switch to trade parity for the fourth quarter, it would cut the under recovery bill by over Rs 20,000 crore to Rs 1.45 crore.. The finance ministry also believes that this switchover would help saving underrecoveries of Rs 10,000 crore annually and just on diesel alone.
However, the subsidy-sharing mechanism for the full year gone by – FY13 - has still not been finalised. Oil public sector undertakings (PSUs) are hoping to get some clarity post the announcement of the subsidy-sharing mechanism. For the first nine months of FY13 –the finance ministry had agreed to a cash assistance of about Rs 55,000 crore. But there is no word as yet on to how the Centre will compensate in Q4.