WTO seeks explanation on fuel price controls

NEW DELHI: The World Trade Organisation (WTO) has sought a clarification from New Delhi on why fuel prices are ‘monitored’ in the country when prices of petrol and diesel are determined by market forces in India after the dismantling of the administered price mechanism.

There have been several instances when the government has forced public sector oil marketing companies (OMCs) to sell petrol and diesel at a loss, even as global crude prices have been skyrocketing. As OMCs are dominated by public sector companies, private retailers are forced to match the competition or close down their outlets.

Reacting to the trade policy review, the world trade body has asked India to “explain the difference between “price control” and “price monitoring,” an source in the government said. The WTO has also asked India to also specify a “timeline for the release of the said price control or monitoring measures.”

In the Trade Policy Review (TPR), Indian authorities have been quoted stating the “the government also continues to monitor the prices of kerosene, LPG, motor spirit and diesel”. “According to the authorities price monitoring is in the interest of the weaker sections of society,” it added. WTO has also asked India to explain whether the measure for controlling prices of kerosene and LPG is the equivalent of establishing minimum import prices on those products, official sources said.

The report stated, “According to the authorities, complete pass-through of international oil prices, which rose sharply in 2006, could cause severe difficulties for transportation, and have serious inflationary implications. Accordingly, a committee was established to look into various aspects of pricing and taxation of petroleum products. The committee issued its report in February 2006. Following its recommendations, in June 2006 the government commenced a trade-parity-based pricing mechanism, comprising 80 per cent of import price parity and 20 per cent of export price parity. Nevertheless, prices of kerosene and LPG remain subject to government control.”