Sunday, February 1, 2015

PIL-WP questioning the Logic of Petroleum Pricing - Hon'ble Karnataka HC issues Notices




The Public Interest litigation (PIL) - writ petition filed in the Hon'ble Karnataka High Court  by NP Amrutesh, and presented by Senior Advocate SP Shankar, has questioned the unreasonable profits made by the government from sale of petroleum products.

And argues in favour of a sharp drop in retail price of diesel, petrol and LPG to benefit the common man. It argues that the cost for such a drop in retail prices could be easily covered by the humongous sale of 166 by-products of crude oil, and has gone on to say that the actual retail price of diesel in Bengaluru comes to Rs 13.35 per litre. 

Acting on the petition, the High Court issued notices to the Union government and its oil marketing companies and agencies.
The petition, says, "Under RTI Act, specific information is obtained in regard to the actual cost of acquisition, cost of cracking, blending and refining as well as cost of transportation from the refineries to the outlets and that the comprehensive cost of 1 litre of diesel at Bangalore is Rs 13.35 paise. Respondents have not furnished the cost of petrol and kerosene in like terms."

Besides the Union government, the high court issued notices to Indian Oil Corporation (IOC), Hindustan Petroleum (HP), Bharat Petroleum (BP) and oil & Natural Gas Commission (ONGC).

The petition alleged that the government was making profits by selling petroleum products like petrol, diesel, kerosene and LPG at a much higher retail price than what they should actually have.

The petition says the government and oil companies are hiding facts about the actual profits. Around 166 by-products are produced from crude petroleum and all of them are sold. The petition says, "When crude is cracked, refined and blended the products that are generated are 166 in number. The number of by-products has now reached 183. Some of these by-products are used as base material in manufacturing of aspirin and brufane. Entire gamut of base for cosmetics is built on petroleum by-products. Automobile and chemicals and fertiliser industries have roots in petroleum products like naphtha. So the government is never a loser in the matter of refining crude and (is) recovering the entire cost from sale of at least 166 by-products. The GOI through its petroleum ministry has a legal duty to make these aspects transparent and to be accountable to the people."

The petition says that instead of making profit out of the common man, the government can keep the prices low. It says, "The fact that sale of 26 by-products meant for industrial use will alone take care of the entire cost of acquisition of crude, its transportation to refineries at various places in India, for cracking the crude and refinement would show that there is no loss occasioned to the oil industry. Further, rest of the by-products are in constant demand in the market. Their sale is sufficient to make profit."

The petition alleges that the Union government was allowing concentration of wealth and material resources in the hands of the oil companies to the detriment and prejudice of the common good.

"The interest of the public at large is ignored in de-controlling and de-licensing sale of petroleum products by oil marketing companies. (The oil companies) cannot be treated as a trading wing or a commercial enterprise but only a service instrument of the Union of India. People of India do not exist and strive for promoting the interest of oil marketing PSUs or political bosses," it says.

Oil companies exposed

The petition cites the Comptroller and Auditor General (CAG) reports and also from the reports of the oil companies to show that the companies never suffered losses. "CAG of India has castigated the State owned fuel retailers namely Indian Oil Corporation Limited (IOCL), Hindustan Petroleum Chemicals Limited and Bharat Petroleum Chemicals Ltd who have overcharged customers from the years 2007-08 to 2011-12 by rupees 26,626 crore, by way of calculating the desired retail price in a manner as if the product was imported by adding customs duty, freight, insurance, ocean loss and wharf-age charges to the prevailing international price of petroleum products," the petition says. "Thus an expenditure never incurred under the headings of L.C Charges, insurance charges, freight, wharfage charges, custom duty and ocean loss, amounting to Rs 50,513/- crores is added to the cost of petroleum products and is passed on to the consumers," it says.

The petition seeks a transparent regulatory mechanism in the matter of sale of petroleum products; a simple cost accounting method of arriving at the selling price namely cost plus margin of profit. The petition says "how the 166 by-products are marketed is not disclosed. There is no transparency or accountability in fixing the price."

The petition, among other things, has sought pricing of petroleum products be as per Constitutional guidelines of a welfare state. It seeks a transparent manner of pricing the products and a court direction to the Union government to commit oil companies to be non-profit-making units. This can be done by considering petroleum a material resource in which earning profit is forbidden, the petition said.

Source - Bangalore Mirror

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