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Parity Price When the price of a product is directly linked to another price
Import parity price A price charged for a domestically produced good that is set equal to the domestic price of an equivalent imported good (the world price plus transport cost plus tariff) Export parity price, The price that a producer gets or can expect to get for its product if exported
trade-parity price A model for diesel and petrol, which would be a weighted average of the import parity and export parity prices in the ratio of 80:20.
Purchasing power parity the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power. The PPP conversion factor shows how much of a country's currency is needed in that country to buy what $1 would buy in the United States.
In 1970, APM was introduced by which govt would insulate the impact of international crude oil by maintaining an Oil Pool Account (OPA). OPA consisted excise duty, customs duty and sales tax included in the petrol price.
So, using this Oil Pool Account (OPA), the Govt gave money to oil companies to maintain their under-recoveries (because LPG and diesel are sold by Govt at subsidized prices)
Till 1990, OPA was positive and Govt was able to maintain balance with domestic prices and oil company costs In 1991, post liberalization, consumption pattern increased and in late 90's OPA became OPD i.e Oil Pool Deficit running into thousands of crores. This forced Govt to increase petrol and diesel prices to maintain OPA and yet running subsidy program for kersoene and LPG
Import Price Parity (done by NDA Govt in 2001) In 2001, The NDA Govt dismantled APM and allowed market prices (international market) to determine domestic prices.
Although this mechanism dismantled Oil Pool Account concept, Govt did not rationalize taxes imposed on states
The result: Increase in oil prices again. Import Parity Price began to be used when not petro products but only crude oil was imported
The Import parity price (is the price at which the seller exports to another country including cost, insurance and freight expenses)
IPP for crude oil is much less than petro products.
Trade Parity (2006-till present) When International prices began to increase, the import parity pricing mechanism was not helpful to Indian economy It just began to increase and increase crossing 120$ a barrel. Then the Govt decided to use trade parity mechanism wherein the price was fixed as 80:20 ratio i.e 80% import parity and 20% export parity. The export parity price could be incorporated because India began to export certain petro products.
Now, future? Deregulation and rationalization of taxes? Kirit Parikh Committee recommended in Feb, 2010 to the Govt to dismantle any interference in pricing mechanism and rationalize taxes across the country.
if we allow our market open to international markets. It can be very deadly. Just see what happens if oil reaches $150 a barrel, petrol will be Rs.76/liter or so.
VAT as per Delhi. It varies from 33 % to 15 % from State to State ** Petrol Price is decontrolled with effect from 26 June, 2010. The price break up is as per IOC.
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40.91
Particulars Refinery Transfer Price (RTP) for PDS Kerosene (Price Paid by the Oil Marketing Companies to Refineries) Add : Inland Freight and Delivery Charges Add : Marketing Cost of OMCs Add : Marketing Margin of OMCs Total Desired Price-Before Excise Duty, VAT and Wholesale & Retailer Commission Less : Subsidy by Central Government Less: Under-recovery to Oil Marketing Companies Price Charged to Dealers (Depot Price)- Excluding Excise Duty & VAT Add : Excise Duty (Including Education Cess) Add : Wholesale & Retailer Commission and Other charges fixed by State Government Add : VAT (including VAT on Wholesale & Retailer Commission) applicable for Delhi Retail Selling Price at Delhi
35.87 12.03 6.95 38.68 666.25 22.58 270.24 373.43 0.00 25.83 0.00 399.26 399.00
OMCs are currently (effective 01-Oct-11) incurring daily under-recovery of Rs 271 crore on the sale of Diesel, PDS Kerosene and Domestic LPG.
The difference between the cost price and the realized price represents the under-recoveries of the OMCs