Diesel price deregulation uncertainty could affect IOC, ONGC issue price: Montek
New Delhi   03-Nov-2010

The Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, has said that the uncertainty over deregulation of diesel price could impact the issue price of the oil companies.

He was responding to a specific query from Business Line on whether the deregulation issue could impact the forthcoming follow-on offers of IndianOil and ONGC.

Speaking at sidelines of the Petrotech 2010 conference here on Tuesday, he said, “Our policy is clear that we are moving towards deregulation progressively.”

In June, the Government deregulated the petrol prices thus allowing the public sector oil marketing companies to sell the fuel at market price. But diesel prices were not decontrolled. The Government had kept the powers to intervene in case of a high rise and volatility in international oil prices.

The public sector oil marketing companies such as Indian Oil Corporation suffer revenue losses due to selling diesel, PDS kerosene, and cooking gas at an administered price. Upstream companies such as ONGC shoulder part of the subsidy burden arising out of sales of these products.

High tax component

On the issue of high tax component on the auto fuels prices, he said that the Planning Commission is also reviewing the tax structure on petroleum products. Apart from various State levies, the ad-valorem component also leaves a cascading impact on the end price of the product.

“We will examine this issue in the Twelfth Plan,” he added.

The Petroleum Minister, Mr Murli Deora, has been urging the State Governments to reduce and rationalise sales tax/VAT on the auto fuels. In the current taxation structure, VAT is levied by the State Governments on an ad valorem basis - as a percentage of the price of the product. This means that when oil prices are high, the taxation on the products is higher, rendering the product even more expensive.