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Import parity pricing till 1975 Administered Pricing Mechanism (APM)

Evolution of Pricing. Import parity pricing till 1975 Administered Pricing Mechanism (APM) Started in 1975 basis OPC recommendations Modified in 1984 basis OCRC recommendations Phased dismantling of APM Commenced in 1998 APM for refineries and indl. products dismantled in 1998

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Import parity pricing till 1975 Administered Pricing Mechanism (APM)

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  1. Evolution of Pricing • Import parity pricing till 1975 • Administered Pricing Mechanism (APM) • Started in 1975 basis OPC recommendations • Modified in 1984 basis OCRC recommendations • Phased dismantling of APM • Commenced in 1998 • APM for refineries and indl. products dismantled in 1998 • Marketing of ATF deregulated in April 2001 • Full dismantling effective April 2002 Decontrol of Lube pricing in November 1993

  2. Refinery transfer prices (RTP) of products on Import Parity Principle (IPP) RTPs of MS & HSD on Trade Parity effective June 2006 Limited subsidies on PDS SKO and Dom. LPG from Govt. budget Revision in selling prices of MS, HSD, PDS SKO & Dom. LPG basis Govt. approval Selling prices of other products market determined Pricing Post APM Dismantling

  3. Import Parity Pricing (IPP) FOB & Premium ($/bbl) (Basis Published Quotes by Platts and Argus) Ocean Freight ($/MT) (Middle East to Port Refinery Location) Exchange Rate (Rs./$) (for conversion of $ prices to Rupees) Import Duties (As applicable from time to time ) Import Incidental Elements (Ocean Loss, LC Charges, Insurance, Wharfage etc.) = Import Parity Price

  4. Export Parity Pricing (EPP) FOB & Premium ($/bbl) (Basis Published Quotes by Platts and Argus) Exchange Rate (Rs./$) (for conversion of $ prices to Rupees) Advance Licence Benefit on Crude (Rs/KL) (Based on Custom Duty of Crude) = Export Parity Price

  5. Trade Parity Pricing (TPP) 80% of Import Parity Price 20% of Export Parity Price = Trade Parity Price

  6. Port Refineries at Jamnagar, Mumbai, Kochi, Mangalore, Chrennai, Vizag & Haldia are the Primary Pricing Points. Refinery Transfer Pricing

  7. Non refinery ports of Kandla and Paradeep also are the primary pricing points. Smaller ports treated as secondary pricing points & linked to Primary Pricing Points e.g. Goa - Mumbai plus Coastal Freight Tuticorin - Chennai plus coastal freight NE Refineries are at par with Haldia RTP. Refinery Transfer Pricing

  8. Refinery Transfer Price for Inland refineries (Koyali,Mathura etc) based on RTPs of nearest primary port plus Inland freight differential : MS & HSD & LPG - 75% of railway freight for rail distance from nearest primary pricing port SKO – 90% of railway freight for pipeline distance from nearest primary pricing port Other Products – Lumsum amount for inland freight differentials Refinery Transfer Pricing

  9. Refinery Transfer Pricing • Periodicity of Revision: • RTP of MS, HSD, FO & LSHS, Naphtha, Bitumen, ATF(Domestic) etc. revised fortnightly • RTP of ATF (International), SKO & LPG revised monthly • RTP of Speciality Products – Hexane, Solvant, JBO,MTO etc.are revised Monthly.

  10. Buildup of RTP as on 1st July 09

  11. Buildup of RTP as on 1st July 09 Quality premium factor is added to BS II RTP to workout EURO III RTP.

  12. Buildup of RTP as on 1st July 09 HSD BS II

  13. Buildup of RTP as on 1st July 09 Quality premium factor is added to BS II RTP to workout EURO III RTP.

  14. Composition of RSP of MS at Delhi As on 2nd July 2009 Taxation contributes to 48% of RSP of MS

  15. Composition of RSP of HSD at Delhi As on 2nd July 2009 Taxation contributes to 23% of RSP of HSD

  16. Govt. Subsidy on PDS SKO & Domestic LPG

  17. Subsidies on SKO & LPG Cost Price • RTP at Port Refineries • Freight from Port to inland depots/ LPG plants • Terminalling Charges • Mktg. Cost & Margins • LPG Bottling Cost & Cyl. Depreciation Issue Price • Ex- Storage Selling Price • Notional Rail Freight Subsidy = Cost Price - Issue Price

  18. Under Recoveries on Sensitive Products

  19. Domestic Product Prices • OMCs paying Trade/ Import parity prices to refineries for supply of products • Consumer prices of Sensitive products not being maintained in line with Trade/ Import parity pricesresulting in under recoveries to OMCs due to: • Non recovery of cost of products • Non realization of margins allowed

  20. Rising Under Recoveries OMC 21311 Rs.Crs Industry U/R : 20146 40000 49387 77123 103292

  21. Compensation of Under Recovery • Subsidy Sharing Mechanism commenced in 2003-04 with • 1/3 sharing of under recoveries by Upstream Companies • Restricted to under recoveries on PDS SKO & Dom. LPG • Effective 2004-05, upstream sharing extended to MS / HSD also • In view of the adverse financial position due to increasing under recoveries, Govt. started issuing oil bonds to OMCs. • Bonds Received by OMC Rs. Crores 2005-06 2345 2006-07 4930 2007-08 7703 2008-09 14693

  22. Buildup of RTP as on 1st July 09 FO (380 CST Dom.) Marketing Cost & Margin of Rs. 2090/MT is added to RTP to workout BCSP.

  23. Buildup of RTP as on 1st July 09 FO (380 CST Int.) Marketing Cost & Margin of Rs. 2090/MT is added to RTP to workout BCSP.

  24. Buildup of RTP as on 1st July 09 CBFS Marketing Cost & Margin of Rs. 1000/MT for Carbon & Rs 4000 for Non Carbon Black Manufactures is added to RTP to workout BCSP.

  25. Buildup of RTP as on 1st July 09 RPO RTP RTP of CBFS (in MT) Divide : Conversion factor of 1.01 = RTP of RPO ( in KL) (Rounded off) )(Next Re 10)

  26. Buildup of RTP as on 1st July 09 LSHS (Fert. & Non Fert.) Marketing Cost & Margin of Rs. 3090/MT is added to RTP to workout BCSP.

  27. Buildup of RTP as on 1st July 09 Naphtha NF Marketing Cost & Margin of Rs. 3040/MT is added to RTP to workout BCSP.

  28. Buildup of RTP as on 1st July 09 Naphtha Fer. Marketing Cost & Margin of Rs. 2440/MT is added to RTP to workout BCSP.

  29. Buildup of RTP as on 1st July 09 Naphtha For Power Plant Marketing Cost & Margin of Rs. 3040/MT is added to RTP to workout BCSP.

  30. Buildup of RTP as on 1st July 09 Hexane/Solvant 1425

  31. Buildup of RTP as on 01July 09 Bulk Bitumen Grade- ( 60/70)

  32. Buildup of RTP as on 1st July 09 LVFO/FO 600

  33. Buildup of RTP as on 1st July 09 LDO

  34. Buildup of RTP as on 1st July 09 LOBS – SN 500

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