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Product Pricing

The pricing of petroleum products was brought under Administered Price Mechanism (APM) effective July 1975 when the pricing of petroleum products was shifted from import parity principles to cost plus principles. Under APM (1975 to 2002) various oil pool accounts were maintained with the objective to i) ensure stability in selling price; ii) insulate consumers against international price fluctuations; and iii) subsidization of consumer price of certain products like kerosene for public distribution and domestic LPG by cross subsidization from other products like petrol, Aviation Turbine Fuel (ATF) etc. and indigenous crude oil.

Effective 01.04.2002, the APM was dismantled and the Government decided to provide subsidy on sale of PDS kerosene and domestic LPG at specified flat rates under the Budget. To administer these budgetary subsidies, the Government formulated a ‘PDS kerosene and domestic LPG subsidy scheme’ in 2002. Under this scheme it was decided that these subsidies will be phased out in 3-5 years.

Even though APM was dismantled effective 1.4.2002, since 2004, the consumers of sensitive petroleum products viz. Petrol (decontrolled w.e.f. 26.06.2010), Diesel (decontrolled w.e.f. 19.10.2014), PDS kerosene and Domestic LPG were being insulated from the impact of unprecedented high international oil prices by the Public Sector Oil Marketing Companies (OMCs) namely IOCL, HPCL & BPCL.

Prices of petrol and diesel have been market-determined with effect from 26.06.2010 and 19.10.2014 respectively. Since then, the Public Sector Oil Marketing Companies (OMCs) take appropriate decision on pricing of petrol and diesel.
 

India imports more than 55% of its LPG requirement. Prices of LPG in the country are based on Saudi Contract Price (CP), the benchmark for international prices of LPG. For domestic LPG, the Government continues to modulate the effective price to consumer to insulate the common man from rise in international prices.

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