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Kerala High Court asks OMCs what parameters they follow in fixing prices

The Kerala High Court on Tuesday asked State-run oil marketing companies (OMCs) what was the reason for a difference in retail and bulk purchase rates of fuel supplied by them and what was the price-fixation mechanism adopted by them.


“What is the logic or reason for the difference in prices of retail and bulk purchase of high-speed diesel? How do all three OMCs decide the prices? Do they sit together? On what basis or based on what material do they fix the prices? Give us the material for that if you can,” the high court asked the companies.


These queries were put to the OMCs by a bench of Justices C S Dias and Basant Balaji during the hearing of their appeals challenging a single-judge interim order of April 13, directing them to provide high-speed diesel (HSD) to Kerala State Road Transport Corporation (KSRTC) at retail rates instead of the higher bulk-purchase price.


Answering the queries of the court, the OMCs said that when global fuel prices increased drastically this year, they decided not to implement a steep increase in retail prices as it could have led to public unrest.


Therefore, in order to blunt the impact of the increase in fuel prices on the general public, it was decided to hike the rates gradually over a period of time, the OMCs told the court.


Regarding price fixation, the companies said that several parameters –like global crude oil prices, expected future crude oil prices, local taxes and transportation costs – were considered while fixing the rates which were slightly different for each OMC.

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