The Telegraph
Friday , January 10 , 2014
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Rethink on bulk diesel price

New Delhi, Jan. 9: State transport corporations may be exempted from buying diesel at market rates as the policy of making their buses buy diesel at higher prices has flopped. The transport bodies were considered as bulk users of fuel, who were ordered last year to buy diesel at market rates, which were higher than the subsidised rates for consumers.

The government may now partially roll back its order of selling diesel to bulk users at market rates, with sales dropping significantly.

“The objective of differential pricing (subsidised rates for petrol pumps users and market price for bulk consumers) is not being met. We have seen queuing of buses at petrol pumps, leading to congestion and fuel wastage,” oil secretary Vivek Rae said here today.

“We are considering partial rollback of the bulk diesel pricing order,” Rae said.

If approved by the cabinet, the transport corporations will get the relief, while other bulk users such as railways and defence will continue to buy at market price.

“Oil marketing companies have also reported that the dual pricing mechanism is not working since bus fleets of state transport utilities are taking fuel from petrol pumps, causing hindrance in the smooth functioning of retail outlets and in the process wasting fuel,” he said.

The decision in January last year to ask bulk users to pay market price, which is about Rs 10 more per litre than petrol pump rates, had led to protests from several state transport utilities.

The Petroleum Planning and Analysis Cell, under the oil ministry, in a recent report said the share of bulk sales to total sales declined to around 10 per cent in November 2013. It was about 18 per cent in November 2011 and 16.8 per cent in December 2012. The country consumed 5.8 million tonnes of diesel in November.

Rae said the ministry planned to go to the cabinet to seek a minimum $65 per barrel price for state-owned oil and gas explorers such as ONGC to help bring 70 million tonnes of oil to production. The $40-$42 per barrel net price realised by ONGC after paying for subsidies is barely enough to meet costs.

“Upstream companies bear disproportionately higher subsidy burden. They need to generate investible surplus,” he said, adding $65 is the minimum price that is needed to bring marginal and deeper fields into production.