The latest CAG report on oil PSUs which talks of R26,000 crore extra earnings by oil marketing companies IOC, HPCL and BPCL between 2007 and 2012 reiterates an old point. For years, the finance ministry has been arguing that PSU refiners are being paid extra as their ?costs? are calculated on what is called trade-parity pricing. This takes into account both imported prices (80% weight) as well as the price at which products are exported (20% weight). So even though diesel is not imported, the trade-parity pricing imputes a value to the notional import duty, to the freight on imports, and so on. The amount itself is small relative to the under-recoveries that the oil PSUs ? including ONGC and GAIL ? have to bear. Besides, as the report by the Kirit Parikh panel that was tasked to go into the matter pointed out, were export-parity to be applied, this would lower the price charged for petroleum products by around $1.5 per barrel. While the amount was a small one, it would ensure a third of PSU refineries were unviable and would reduce the refining margins of the others by around 30-40%. Something the government needs to keep in mind.
