Panel to decide on new pricing formula: BPCL chief

The new formula for calculating under-recoveries may not have gone well by oil retailers, as costs incurred after importing crude will no longer be re-imbursed to them.

A committee is looking into the pros and cons of the new pricing method, said RK Singh, chairman and managing director, Bharat Petroleum to CNBC-TV18. The Parikh committee has been asked to come up with suggestions based on which the Cabinet would take a call on introducing it or not. Read This: Logical to have trade parity pricing: Kirit Parikh According to previous method, popularly called ' import parity pricing' oil companies factored in levies, logistics and freight charges before selling products. . These costs are then recovered from the government and oil exploration companies as part of the compensation formula. However, with the export parity formula likely to be introduced, costs incurred after importing crude will not be compensated. The finance ministry is keen to change pricing formula which is expected to result in significant savings to the state exchequer. Below is the verbatim transcript of his interview on CNBC-TV18 Q: Could you walk us through where under recoveries stand at for diesel now after the most recent price increase and why you chose to increase the prices a fortnight ahead of schedule? A: As far as diesel prices are concerned decision is that we will raise it by 50 paise every month. This is the beginning of the month, so we did it. Therefore, date is not important, what is important is that every month we have to increase the price by 50 paise which we did. Secondly, your question about the under recovery, the under recovery has gone up to Rs 5 plus because of the rupee-dollar exchange rate. Now with the 50 paise hike it has come down to Rs 4.50 or so. The only thing that is making a difference is the exchange rate otherwise prices by and large have remained stable. Q: There has been a cool off in Brent prices, you have not received any communication or any suggestion that you should be relooking the petrol prices specifically because of Brent trading sub USD 100 now? A: We have reduced petrol prices three times but we had to increase it this time by 76 paise mainly because of the exchange rate worsening. Petrol price goes for revision every fortnight. In the next fortnight that is June 15 if the situation improves then we will again pass on the benefits to the consumer. But this price increase is based on last 15 days average. Q: When do you expect to hear more details on the entire export parity pricing issue? A: A committee has been appointed under Kirit Parikh who is going to look at the whole issue of refinery pricing formula, so let us wait and see what happens. We have put forth our viewpoint and the government has its own viewpoint, so all these viewpoints will be examined by the committee and I think we will get another opportunity to prove our point. I don't think export parity is going to come through but what formula will ultimately emerge remains to be seen.