The government on Thursday rejected demand of private retailers, including Reliance Industries Ltd, for compensation equal to public sector oil firms to make up for the losses it suffered on petrol and diesel sales.
"The private sector oil companies have demanded subsidy from the government for the losses they have sustained on sale of petrol and diesel. However, since they are not subject to pricing restrictions by the government, there can be no compensation for marketing of petrol and diesel within the country by them," Petroleum Minister Murli Deora said on Thursday.
In a written reply to a question in Lok Sabha, Deora said private oil companies were free to take their pricing decisions on commercial considerations.
All companies, including Oil and Natural Gas Corporation, Mangalore Refinery and Petrochemicals Limited and Numaligarh Refinery Ltd, who have been granted authorisation to market petrol and diesel when the sector was deregulated in 2002, are not covered under the subsidy sharing mechanism, he said.
The government subsidy was only available to Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum and IBP.
RIL is losing Rs 3.37 per litre on petrol and Rs 5.77 a litre on diesel despite pricing the auto fuels about Rs 2.50 a litre higher than the price charged by PSU firms, who are compensated for the losses through a combination of discounts from upstream companies like ONGC and issue of oil bonds.
Deora said the Cabinet had in June decided on a burden sharing formula where the government, the oil firms and consumers were to share the impact of surging crude oil prices.
"There is no need to favour only the PSU oil marketing companies in a partisan and non-transparent manner. Provision of similar support to the private sector does not increase the financial burden of the government of India since denial of the support will only shift volumes from the private sector to PSUs to whom an equivalent subsidy will need to be paid," RIL recently written to the petroleum ministry.
Reliance had suggested an increase the cess on domestic crude and use the revenue to moderate the excise duty on petrol and diesel, so as to place all players at par.
"Alternatively, oil bonds and upstream support should be extended to the private companies," it said.
Reliance, which has more than 1250 petrol pumps on ground and another 900 more awaiting commissioning, lost 12 per cent market share in diesel sales after it priced its product higher than PSU.
"Role of the government is to ensure level playing field especially in terms of uniform pricing policies for all the players, both private and PSU in refining and marketing operations so that consumers are benefited from open, transparent competition," the company had written.
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