ONGC, OIL decry ‘ad hoc, opaque’ subsidy regime

As the Kirit Parikh committee on fuel pricing prepares its report for submission, state-run oil producers Oil and Natural Gas Commission and Oil India Ltd have strongly decried the ad hoc manner in which they are forced to give subsidies to oil marketers. Instead, they have proposed a 'windfall tax' beyond a threshold price.

In an interview with CNBC-TV 18, ONGC chairman R S Sharma said there was no case to subsidise petrol. ''We have suggested windfall tax rate at various crude levels and need to fix retail fuel rates according to crude prices,'' he said.

The report of the Parikh committee-the third expert group set up by the UPA government in the last five years to suggest a sustainable fuel pricing model-would be out by January-end. Parekh is a former Planning Commission member and the architect of the integrated energy policy.

Sharma said it was wrong to keep kerosene and liquefied petroleum gas (LPG) completely insulated from crude. The mechanism of subsidies remained unchanged for the third quarter, he said, adding that he expected the committee to take a ''dynamic'' view on the issue.

On the company's plans going forward, Sharma said, ''We would have an initial public offer (IPO) of ONGC Petro-additions (OPaL), a special purpose vehicle promoted by ONGC and Gujarat State Petroleum Corporation (GSPC), in two years.'' However, he said, the company was not looking at selling stakes in Petronet and GAIL for now.

According to reports, both ONGC and OIL have put before the committee their opposition to the ad hoc manner in which they are forced to give discounts to oil marketers as a means of sharing subsidy on fuels. Such discounts vary each year, making it difficult for explorers to make future plans or projections.