There are two sets of discussions that are going on in the petroleum and gas sector in the government corridors, sources privy to the developments told CNBC-TV18.
"Firstly, the Centre is considering the inclusion of the gas sector under the windfall gains tax ambit. Secondly, the Centre is contemplating whether it can consider moving away from a daily price revision for retail fuel and ease out the pressure by reviewing the need and relevance of including freight cost, sea insurance cost in petrol and diesel pricing formula," sources in the know told CNBC-TV18.
A windfall tax is a higher tax rate on sudden big profits which is levied on a particular company or industry.
On the proposal to bring the gas sector under the recently announced windfall gains tax ambit, the government is mulling whether it could be a worthwhile to pursue, as global gas prices have increased and domestic producers are making windfall gains.
The sources told CNBC-TV18 that given the rise in international prices, discussions are on about whether the government can tap some of these gains to augment revenues.
But, has the government taken a call?
Sources clearly said, "This is still at a discussion stage and no final decision has been taken as yet. Secondly, the government is also contemplating whether it can consider moving away from a daily price revision provision for retail fuel prices.”
The last retail fuel price revision took place in early April and since then there is a pause in the fuel price revision. It is understood that the "government took a political call to freeze retail fuel price revision to keep inflation under check and ensure that it doesn’t have any negative ripple effect on consumers and the economy," said people familiar with the matter.
On this aspect, sources shared that talks and discussions are underway "to review the need and relevance of including freight cost, sea insurance cost in petrol and diesel pricing formula."
The rationale here is that since crude is imported and then refined domestically, these two costs are already embedded in the import costs. This too is at the discussion stage and there is still time for a decision to be taken, sources added.
In addition, the government is also discussing another proposal to probably shift to a monthly, bi-monthly or weekly fuel price revision instead of a daily price revision provision.
The government is of the opinion that since oil marketing companies (OMCs) have managed to balance out profits and losses with lesser frequency of revision, this could perhaps be a better option for consumers and retailers, sources said.
"Discussions here are based on recent concerns shared by OMCs seeking clarity on price revision stability and flexibility to raise and revise prices as it impacts their businesses," sources added.
However, this again is at the discussion level and no decision has been taken, sources said. "The government is cautious and wants to take steps to ensure there are uninterrupted fuel and gas supplies at an affordable price for consumers. A lot of discussions with various stakeholders are happening at various levels," sources privy to the developments told CNBC-TV18.
When asked when there will be more clarity or any decision, sources told CNBC-TV18 that "any decision on changing fuel price revision window will be based to ensure that due benefits are passed on to consumers in time. So these are complex issues and require a detailed series of deliberations."
So at this stage, there are more questions than answers. What will finally transpire from this discussion exercise? Will the government actually move forward and accept any of these ideas on the drawing board? How will these proposals impact the companies and the consumers? Keep watching this space.
