The first year in the pricing period is called the base year. The exercise is normally undertaken in the middle of the pricing period and completed at the end of the pricing period. The costs incurred during the said period, including projections for the pricing cycle, is collated for each of the oil companies and ad-hoc margins are worked out first and thereafter replaced by final margins. It may be noted that not all costs are reimbursed and the expert committee of OCC moderates the actual costs. The operating cost so arrived will be static during the pricing period excepting for the following escalations which are considered for reimbursement on the merits of each case.
Depreciation is computed on pro-rata basis for assets commissioned during the year.
However, while working out the margins large capitalization involving substantial changes in product pattern, standard throughput etc are considered only as and when these projects are commissioned. A fortune in black gold. 2001 India Infoline Ltd. All rights reserved.