Lok Sabha Question No. 1305 (UNSTARRED), answered on 2017-07-24
Subject: Prices of Petroleum Products
Ministry: PETROLEUM AND NATURAL GAS
Asked by: ANANT KUMAR DATTATREYA HEGDE, PINAKI MISRA, E. T. MOHAMMED BASHEER, R. PARTHIPAN, KIRTI (JHA) AZAD

## LOK SABHA

## UNSTARRED QUESTION NO. 1305 TO BE ANSWERED ON 24 TH  JULY, 2017

## PRICES OF PETROLEUM PRODUCTS

## †1305. SHRI ANANTKUMAR HEGDE:

SHRI PINAKI MISRA:

SHRI E.T. MOHAMMED BASHEER:

SHRI R. PARTHIPAN:

SHRI KIRTI AZAD:

## isVªksfy;e vkSj izkÑfrd xSl ea=h

## Will the Minister of PETROLEUM AND NATURAL GAS be pleased to state:

- (a)  whether  petrol  and  diesel  have  been/are  being  sold  to  consumers  in  proportion  to international crude oil prices during the last three years and the current year and if so, the details thereof;
- (b) the revenue and profit earned by the public sector oil companies from the sale of petrol and diesel by taking advantage of low international crude oil prices during the said period, company-wise;
- (c) whether gas is not sold to consumers on the above basis and if so, the reasons therefor along with the criteria/ formula for fixing the consumer sale prices of gas in the country;
- (d)  whether  the  daily  pricing  practice  is  aimed  to  bring  the  country  at  par  with  the  United States  of  America  oil  market  and  private  retailers  are  also  switching  to  the  new  pricing mechanism and if so, the details thereof along with any guidelines for private retailers issued by the Government after the de-control of petroleum products including petrol and diesel in the country;
- (e)  whether  the  Government  monitors  the  prices  of  various  petroleum  products  including petrol and diesel fixed by the private companies to ensure that the prices are in conformity with the variation in the crude oil prices in the international markets; and
- (f) if so, the details thereof and the steps taken against private companies for not passing the benefit  of  low  crude  oil  prices  to  the  consumers  and  also  to  safeguard  the  interest  of  the consumers?

## ANSWER

## isVªksfy;e vkSj izkÑfrd xSl ea=h ( Lora= izHkkj ) ¼Jh /keZsUnz iz/kku½

## MINISTER OF STATE (I/C) IN THE MINISTRY OF PETROLEUM AND NATURAL GAS (SHRI DHARMENDRA PRADHAN)

(a) & (b): Prices  of  Petrol  and  Diesel  have  been  made  market-determined  effective 26.06.2010  and  19.10.2014  respectively.  Since  then,  the  Public  Sector  Oil  Marketing Companies (OMCs) take appropriate decision  on  pricing  of  Petrol  and  Diesel  in  line  with international product prices and other market conditions.   Retail Selling Price (RSP) of Petrol and Diesel in the country are not linked to the international crude oil prices but are linked to the international prices of Petrol and Diesel and at present public sector OMCs apply Trade Parity Pricing methodology to compute the RSP.

Refining of crude oil is a process industry, where crude oil constitutes around 90% of the  total  cost.  Crude  oil  is  processed  through  several  processing  units.  Each  of  these  units produces intermediate products streams, which require further reprocessing and blending.  As it  is  difficult  to  apportion  the  total  cost  amongst  individual  refined  products,  product-wise costs are not identified separately

However the revenue and Profit after Tax of the OMCs from all activities during the last three years is given as under:-

(Rs. Crore)

| Particulars   | 2014-15   | 2015-16   | 2016-17   |
|---------------|-----------|-----------|-----------|
| Turnover      |           |           |           |
| IOC           | 4,36,390  | 3,49,321  | 4,38,692  |
| HPC           | 2,06,380  | 1,79,281  | 2,13,489  |
| BPC           | 2,37,905  | 1,89,098  | 2,41,859  |
| PAT           |           |           |           |
| IOC           | 5,273     | 10,399    | 19,106    |
| HPC           | 2,733     | 3,863     | 6,209     |
| BPC           | 5,085     | 7,432     | 8,039     |

(c): The natural gas is sold as per formula used to determine the price of domestic natural gas  notified  under  the  New  Domestic  Natural  Gas  Pricing  Guidelines,  2014  include  the following:

Prices prevailing in HH (USA), NBP (UK), Alberta (Canada) and Russia are used as inputs to determine the price of domestic natural gas, as per the following formula:

<!-- formula-not-decoded -->

## Where ,

P = Wellhead gas price

VHH = Total Annual volume of Natural Gas consumed in United States and Mexico

VAC = Total Annual volume of natural gas consumed in Canada

VNBP =  Total Annual volume of natural gas consumed in EU and FSU excluding Russia

VR = Total Annual volume of natural gas consumed in Russia

PHH = Annual average of daily Henry Hub prices

PAC = Annual average of monthly Alberta Market Price

PNBP =  Annual average of daily NBP UK prices

PR = Annual average of monthly prices of Russia

PHH ,  PAC,  PNBP  and  PR  shall  be  calculated  after  deducting  the  US$  0.50/MMBTU  towards transportation and treatment charges.

Domestic price of natural gas is linked to the prices at major international hubs and tries  to  balance  the  interests  of  producers  as  well  as  consumers.    The  pricing  of  domestic natural  gas  is  determined  based  on  aforesaid  formula  on  six  monthly  basis,  which  is applicable  to  all  the  sectors  uniformly,  except  those  specified  in  the  Guidelines.      These Guidelines are available on Ministry's website.

- (d): As mentioned above, prices of Petrol and Diesel have been made market determined and Public Sector OMCs take decision on pricing themselves. Public Sector OMCs, namely,

Indian  Oil  Corporation  Limited,  Hindustan  Petroleum  Corporation  Limited  and  Bharat Petroleum  Corporation  Limited  have  implemented  daily  revision  of  retail  selling  price  of Petrol and Diesel in the entire country effective 16th June, 2017.

Daily price revisions of Petrol and Diesel make the retail prices more reflective of the current market conditions, minimizing the volatility in the RSP of Petrol and Diesel.  Further, it leads to increased transparency in the system and enables smoother flow of products from refinery/depots to Retail Outlets.

(e) & (f): The private oil companies decide themselves the prices of Petrol and Diesel being sold from the Retail outlets run by them.