Also Read: Petrol price cut by 75 paise a litre; diesel hike put off
Also, OMCs have cut petrol prices by just 75 paise per litre against an expectation of a Rs 2 cut. Are these companies cross-subsidising diesel losses by petrol gains?
SK Joshi, former director-finance, BPCL , throws some light on the matter.
Below is the transcript of SK Joshi's interview with CNBC-TV18's Senthil Chengalvarayan, Menaka Doshi and Anuj Singhal.
Menaka: Should we believe any of these figures – under-recoveries currently of diesel at 5.93; the petrol price today should be at Rs 72 and not at Rs 68-69. Should we believe any of these numbers?
A: The companies' accounts are audited and subjected to accounts. So, I have no doubt that there will be fudging of numbers. It is crystal clear that the pricing is worked out and then checked by audit, the government audit also checks it so there is no chance of any miscalculation in terms of pricing.
Menaka: The cut should on petrol should have been much bigger than just 75 paisa. It should have been Rs 2-3. Can you explain to us why it is not Rs 2-3 and why it is only 75 paisa?
A: I don't have the actual numbers since I am no more with BPCL but one thing is that these numbers are worked out with formula and the basis. One more argument that petrol is subsidising the diesel doesn't hold good because quantitatively petrol is a very small volume business. So, it can't subsidise the diesel per se and that doesn't work like that. So, cross-subsidisation is ruled out and there maybe fortnight to fortnight few gaps but overall throughout the year if you look at the yearly numbers there is no cross-subsidisation.
Anuj: I am looking at the diesel and petrol prices since September, since then the kind of hike that has been seen in diesel prices and the kind of changes have been seen in the petrol prices, and the under-recovery that's been spoken about (in diesel), the break-even in petrol, these numbers don't add up. It quite clearly shows that there would have been scope of about Rs 3-4 cut in petrol prices. Privately when I talk to some of these OMCs they say petrol is slightly more insensitive politically because at the end of the day end-users can afford, diesel users cannot afford that, do you think that at some point is playing a bit of a part.
A: As I said you have to look from point to point. At that point what was the forming part of those pricing, it has to be looked at and then it can be seen. However, I know the working, if you at look at full year numbers there won't be any great mismatch; that has to be balanced.
In fact, finance ministry will not allow the oil company to make money in some part. In fact it works the other way. If refining margins are doing well and currently it is so, the regional margins are good, we have a worry that government will take away that benefit. They are performing well in the other segment because the subsidy burden is huge. This year it is around Rs 1,41,000 crore. If government doesn't compensate that it doesn't allow us to retain the advantage. So, you look at beyond petrol.
Anuj: The other issue is that when I talked to some of these companies the same point is again raised that you have to look at what point was the crude bought, you have to look at what point are we carrying our inventory. Why not make this whole process transparent?
Menaka: I want to add to that question. Why is this process not transparent? This is almost like you have to re-invent some big scientific discovery just to figure out what we are paying for petrol and why or diesel even?
A: I can talk about BPCL, how it manages the crude procurement, etc. We have a sophisticated system and then we are tracking the sale at the retail outlet level and work back the requirement of crude and storage point requirement and accordingly crude is procured, our books are open books.
Menaka: We are not making allegations against individual companies. We are just saying this process is way too opaque for consumers to fully understand what they are paying for petrol and whether they are cross-subsidising.
Senthil: Is the basket a constant basket or does it change, does it have to change?
A: I can say that you can go back to the numbers because these prices are not hidden prices, these are international prices. So, you can look at the international prices of crude, the Indian basket, Brent because our crude is linked with Brent and those prices are open prices. There is no chance of hiding any numbers. Pricing is based with a formula at the nozzle point. These are completely formula driven. There is no iota of doubt about each stage of pricing and auditors do look at it. When the auditors approve our subsidy claims they do audit the entire thing. I personally don't have any doubt that there is a possibility of fudging the numbers.
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