Moily opposed to finance ministry move on fuel pricing norm

Oil minister M Veerappa Moily today raised objection to the finance ministry's move to cut subsidies by changing fuel pricing norm, saying not compensating oil PSUs for their losses would put a question mark on their survival.

The finance ministry intends selling petrol and diesel pricing at a rate on par with the export market, rather than current practice of pricing the fuels after adding transportation and customs duty to the international price.

"From 2005-06, the oil marketing companies have not been adding any margin on crude oil or on petroleum products. What is import price plus transportation and taxes is all that is there in the selling price," he told reporters.

According to Moily, the three OMCs, IOC, BPCL and HPCL, were together projected to end the fiscal with a revenue loss of Rs163,000 crore in current fiscal year, of which the finance ministry wanted to shave off Rs17,000 crore by changing methodology to export parity pricing (EPP).

"If you decrease their compensation by Rs.17,000 crore, where will they get money for expansion and modernisation of refineries?" the oil minister asked.

According to the PTI report, citing the example of China which was pushing ahead with expansion of refineries on a massive scale, Moily said oil firms needed $80 billion to modernise and expand old and obsolete units.