Post deregulation of MS wef 25.06.10, Oil Marketing Companies (OMCs) are reviewing MS prices on fortnightly basis and have revised the prices on several occasions.
During 2011-12, MS prices were revised five times in order to bring domestic prices in line with prices in the international market. Out of this, there were upward revision three times, and downward revision twice, latest being the price reduction of Rs 0.78/litre (Delhi market) on 1st Dec’11. Thereafter, due to domestic market conditions, it has not been possible to change selling price of MS in line with international prices. As a result, Corporation has suffered a loss of Rs.2108 crore (Industry: Rs 4651 crore) since the last price change, of which Rs 1052 Crore (Industry: Rs 2321 crore) loss was incurred up to 31st March, 2012 and balance Rs 1056 Crore (Industry: Rs 2330 crore) during current financial year (i.e. 2012-13) till date.
Since last price change w.e.f 01.12.11, international oil prices have increased and USD-INR exchange rate has shown further deterioration. While Indian basket of crude has increased by 3.5% from $109.23/bbl to $113.08/bbl, international MS price has gone up by 14.5% from $108.62/bbl to $124.42/bbl. USD-INR exchange rate has deteriorated 3.2% from Rs 51.50/$ to Rs 53.17/$. The combined effect of changes in international MS price and exchange rate has resulted in an increase in under-recovery since last price change. However, due to declining international MS prices during the current fiscal, under-recovery has shown a downward trend from Rs. 8.04/litre in April’12 2nd fortnight to Rs 7.17/litre during May’12 1st fortnight, and further to Rs 6.28/litre during current fortnight.
Given the losses being incurred, the Company is compelled to increase the price of MS by Rs.6.28 per litre (excluding VAT / Sales Tax) w.e.f. mid-night of 23/24.5.12. This excludes losses already suffered till date during current financial year, i.e., 2012-13, which would require an additional increase of around Rs 1.50/ litre in selling price of MS for balance part of the year.
The above increase of Rs.6.28 per litre is exclusive of Sales Tax / VAT. Given that the rate of Sales Tax / VAT varies from 15% to 33% in the States, additional sales tax of Rs.0.94 to Rs 2.07 per litre shall be added to the aforesaid increase. This shall be over and above the existing Sales Tax of Rs.10.30 per litre to Rs.18.74 per litre already being levied in the existing MS prices.
In addition, OMCs are suffering high level of under-recoveries on three sensitive petroleum products, namely HSD, SKO (PDS) and LPG (Dom). Last revision in selling price of sensitive products was undertaken w.e.f 25 June’11. As compared with last price change, current under-recovery on HSD has gone up from Rs 6.13/litre to Rs 13.64/litre, for SKO (PDS) from Rs 24.16/litre to Rs 31.41/litre and for LPG (Dom) from Rs 331.13/cyl to Rs 479.00/cyl as on 16 May’12. At these rates, it is estimated that under-recovery on sale of sensitive products during 2012-13 shall be around Rs 100000 Crore (Industry: Rs 186000 crore).
The international MS prices and exchange rates are being monitored closely by the Corporation and impact of changes in these factors shall be considered in determining the selling price of MS in future.
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