1.  Import parity pricing till 1975  Administered Pricing Mechanism (APM)  Started in 1975 basis OPC recommendations  Modified in 1984 basis OCRC recommendations  Phased dismantling of APM  Commenced in 1998  APM for refineries and indl. products dismantled in 1998  Marketing of ATF deregulated in April 2001  Full dismantling effective April 2002 Evolution of Pricing Decontrol of Lube pricing in November 1993

2.  Refinery transfer prices (RTP) of products on Import Parity Principle (IPP)  RTPs of MS & HSD on Trade Parity effective June 2006  Limited subsidies on PDS SKO and Dom. LPG from Govt. budget  Revision in selling prices of MS, HSD, PDS SKO & Dom. LPG basis Govt. approval  Selling prices of other products market determined Pricing Post APM Dismantling

3. Import Parity Pricing (IPP) FOB & Premium ($/bbl) (Basis Published Quotes by Platts and Argus) Ocean Freight ($/MT) (Middle East to Port Refinery Location) Exchange Rate (Rs./$) (for conversion of $ prices to Rupees) Import Duties (As applicable from time to time ) Import Incidental Elements (Ocean Loss, LC Charges, Insurance, Wharfage etc.) = Import Parity Price

4. Export Parity Pricing (EPP) FOB & Premium ($/bbl) (Basis Published Quotes by Platts and Argus) Exchange Rate (Rs./$) (for conversion of $ prices to Rupees) Advance Licence Benefit on Crude (Rs/KL) (Based on Custom Duty of Crude) = Export Parity Price

5. Trade Parity Pricing (TPP) 80% of Import Parity Price 20% of Export Parity Price = Trade Parity Price

6. Refinery Transfer Pricing  Port Refineries at  Jamnagar,  Mumbai,  Kochi,  Mangalore,  Chrennai,  Vizag &  Haldia are the Primary Pricing Points.

7. Non refinery ports of Kandla and Paradeep also are the primary pricing points. Smaller ports treated as secondary pricing points & linked to Primary Pricing Points e.g.  Goa - Mumbai plus Coastal Freight  Tuticorin - Chennai plus coastal freight NE Refineries are at par with Haldia RTP. Refinery Transfer Pricing

8. Refinery Transfer Price for Inland refineries (Koyali,Mathura etc) based on RTPs of nearest primary port plus Inland freight differential :  MS & HSD & LPG - 75% of railway freight for rail distance from nearest primary pricing port  SKO – 90% of railway freight for pipeline distance from nearest primary pricing port  Other Products – Lumsum amount for inland freight differentials Refinery Transfer Pricing

9. Periodicity of Revision:  RTP of MS, HSD, FO & LSHS, Naphtha, Bitumen, ATF(Domestic) etc. revised fortnightly  RTP of ATF (International), SKO & LPG revised monthly  RTP of Speciality Products – Hexane, Solvant, JBO,MTO etc.are revised Monthly. Refinery Transfer Pricing

10. MS BS II Mumbai FOB AG(Including Prem.) $/BBL 72.77 Freight (Sitra to Indian Port) $/BBL 0.92 C&F Price $/BBL 73.69 Rs./KL 22407.15 Custom Duty Rs./KL 583.34 Other Charges (Insurance, Ocean Loss etc.) Rs./KL 229.80 IPP Rs./KL 23220.29 Buildup of RTP as on 1 st July 09

11. MS BS II Mumbai FOB AG(Including Prem.) $/BBL 72.77 FOB Price Rs./KL 22128.29 EPP Rs./KL 22128.29 RTP Rs./KL 23001.91 Buildup of RTP as on 1 st July 09 Quality premium factor is added to BS II RTP to workout EURO III RTP.

12. Mumbai FOB AG(Including Prem.) $/BBL 78.54 Freight (Sitra to Indian Port) $/BBL 1.05 C&F Price $/BBL 79.59 Rs./KL 24124.07 Custom Duty Rs./KL 628.03 Other Charges (Insurance, Ocean Loss etc.) Rs./KL 250.30 IPP Rs./KL 25002.40 HSD BS II Buildup of RTP as on 1 st July 09

13. HSD BS II Mumbai FOB AG(Including Prem.) $/BBL 78.54 FOB Price Rs./KL 23806.02 EPP Rs./KL 23806.02 RTP Rs./KL 24763.12 Buildup of RTP as on 1 st July 09 Quality premium factor is added to BS II RTP to workout EURO III RTP.

14. Component Amount% of RSP Basic Price22.1550 Excise Duty13.7531 Sales Tax7.4417 Dealer Commission1.052 Freight & Others0.240 Total Retail Selling Price 44.63100 Taxation contributes to 48% of RSP of MS Composition of RSP of MS at Delhi As on 2 nd July 2009

15. Component Amount% of RSP Basic Price24.3974 Excise Duty3.7111 Sales Tax & Air Ambiance charges3.9012 Dealer Commission0.632 Others0.241 Total Retail Selling Price 32.87100 Composition of RSP of HSD at Delhi As on 2 nd July 2009 Taxation contributes to 23% of RSP of HSD

16. Govt. Subsidy on PDS SKO & Domestic LPG

17. Issue Price  Ex- Storage Selling Price  Notional Rail Freight Cost Price  RTP at Port Refineries  Freight from Port to inland depots/ LPG plants  Terminalling Charges  Mktg. Cost & Margins  LPG Bottling Cost & Cyl. Depreciation Subsidy = Cost Price - Issue Price Subsidies on SKO & LPG

18. Under Recoveries on Sensitive Products

19. Domestic Product Prices  OMCs paying Trade/ Import parity prices to refineries for supply of products  Consumer prices of Sensitive products not being maintained in line with Trade/ Import parity prices resulting in under recoveries to OMCs due to:  Non recovery of cost of products  Non realization of margins allowed

20. Rising Under Recoveries Rs.Crs Industry U/R : 20146 40000 49387 77123 103292 21311 OMC

21. Compensation of Under Recovery  Subsidy Sharing Mechanism commenced in 2003-04 with  1/3 sharing of under recoveries by Upstream Companies  Restricted to under recoveries on PDS SKO & Dom. LPG  Effective 2004-05, upstream sharing extended to MS / HSD also  In view of the adverse financial position due to increasing under recoveries, Govt. started issuing oil bonds to OMCs.  Bonds Received by OMC Rs. Crores 2005-06 2345 2006-07 4930 2007-08 7703 2008-09 14693

22. Mumbai FOB AG $/MT 389.13 Freight (Sitra to Indian Port) $/MT 11.56 C&F Price $/MT 400.69 Rs./MT 19308.78 Custom Duty Rs./MT 1048.80 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 291.23 RTP (Rounded off)(Next Re10) Rs./MT 20740.00 FO (380 CST Dom.) Buildup of RTP as on 1 st July 09 Marketing Cost & Margin of Rs. 2090/MT is added to RTP to workout BCSP.

23. Mumbai FOB AG $/MT 389.13 Freight (Sitra to Indian Port) $/MT 11.56 C&F Price $/MT 400.69 Rs./MT 19308.78 Custom Duty Rs./MT 0 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 291.23 RTP (Rounded off)(Next Re10) Rs./MT 19690.00 FO (380 CST Int.) Buildup of RTP as on 1 st July 09 Marketing Cost & Margin of Rs. 2090/MT is added to RTP to workout BCSP.

24. Mumbai FOB AG $/MT 391.91 Freight (Sitra to Indian Port) $/MT 11.56 C&F Price $/MT 403.47 Rs./MT 19462.19 Custom Duty Rs./MT 1055.78 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 272.58 RTP (Rounded off)(Next Re10) Rs./MT 20880.00 CBFS Buildup of RTP as on 1 st July 09 Marketing Cost & Margin of Rs. 1000/MT for Carbon & Rs 4000 for Non Carbon Black Manufactures is added to RTP to workout BCSP.

25. Buildup of RTP as on 1 st July 09 RPO RTP Divide : Conversion factor of 1.01 = RTP of RPO ( in KL) (Rounded off) )(Next Re 10) RTP of CBFS (in MT)

26. Mumbai FOB AG $/MT 391.91 Freight (Sitra to Indian Port) $/MT 11.56 C&F Price $/MT 403.47 Rs./MT 19442.75 Custom Duty Rs./MT 1055.78 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 292.33 Add : Additional Margin Rs./MT 1500.00 RTP (Rounded off)(Next Re10) Rs./MT 21380.00 LSHS (Fert. & Non Fert.) Buildup of RTP as on 1 st July 09 Marketing Cost & Margin of Rs. 3090/MT is added to RTP to workout BCSP.

27. Mumbai FOB AG (Including Premium) $/MT 581.62 Freight (Sitra to Indian Port) $/MT 7.82 C&F Price $/MT 589.44 Rs./MT 28404.29 Custom Duty Rs./MT 1593.47 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 377.55 RTP (Rounded off) Rs./MT 30980.00 Naphtha NF Buildup of RTP as on 1 st July 09 Marketing Cost & Margin of Rs. 3 040/MT is added to RTP to workout BCSP.

28. Mumbai FOB AG (Including Premium) $/MT 581.62 Freight (Sitra to Indian Port) $/MT 7.82 C&F Price $/MT 589.43 Rs./MT 28404.29 Custom Duty Rs./MT 0 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 377.55 RTP (Rounded off) Rs./MT 29390.00 Naphtha Fer. Buildup of RTP as on 1 st July 09 Marketing Cost & Margin of Rs. 2440/MT is added to RTP to workout BCSP.

29. Mumbai FOB AG (Including Premium) $/MT 627.27 Freight (Sitra to Indian Port) $/MT 7.82 C&F Price $/MT 635.09 Rs./MT 30604.29 Custom Duty Rs./MT 0 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 377.55 RTP (Rounded off) Rs./MT 29390.00 Naphtha For Power Plant Buildup of RTP as on 1 st July 09 Marketing Cost & Margin of Rs. 3040/MT is added to RTP to workout BCSP.

30. Mumbai FOB AG of Naphtha(Monthly) $/MT 568.34 Add : Escalation @ 27% $/MT 153.45 Add : Premium of Naphtha $/MT 46.10 Freight (Sitra to Indian Port) $/MT 7.82 C&F Price $/MT 775.71 Rs./MT 37380.62 Custom Duty Rs./MT 1946.30 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 433.47 Less : Premium Adjustment Rs./MT 750.00 RTP (Rounded off) Rs./MT 39020.00 Hexane/Solvant 1425 Buildup of RTP as on 1 st July 09

31. Mumbai FOB AG $/MT 392.50 Freight (Sitra to Indian Port) $/MT 15.00 C&F Price $/MT 407.50 Rs./MT 19656.70 Custom Duty Rs./MT 1977.88 Other Charges (Insurance, Ocean Loss etc.) Rs./MT 287.05 Less : Package Differential Rs./MT 1710.00 RTP (Rounded off) Rs./MT 20200.00 Bulk Bitumen Grade- ( 60/70) Buildup of RTP as on 01July 09

32. Mumbai RTP of FO Rs./KL 20035.00 RTP of FO (Con. Factor 1.0424) Rs./MT 20884.48 RTP of HSD BS II Grade Rs./KL 24699.87 RTP of HSD Grade(C. V. 1.99) Rs./MT 29615.34 RTP of FO Grade (100 % FO + 25% HSD) Rs./MT 28288.32 Conversion Factor (MT to KL) 1.3422 RTP of FO Grade Rs./KL 21076.84 Add : Processing Cost Rs./KL 120.00 RTP Rs./KL 21196.84 RTP (Rounded off) Rs./KL 21200.00 LVFO/FO 600 Buildup of RTP as on 1 st July 09

33. Mumbai 80 % of Avg. RTP of HSD Rs./KL 19653.82 20% of Avg. RTP of Fo Rs./KL 4046.29 RTP of LDO(R/off) Rs./KL 23710.00 Add : Marketing Cost & margin Rs./KL 6260.00 BCSP of LDO Rs./KL 29970.00 LDO Buildup of RTP as on 1 st July 09

34. Mumbai FOB (based on Singapur) $/MT 672.50 Freight $/MT 25.00 Insurance & Landing Charges $/MT 17.44 CIF Price $/MT 714.94 Custom Duty $/MT 35.75 Port Price $/MT 750.59 Rs/MT 40632.00 Port Price (CF 0.8938) Rs/KL 32562.00 Less : Quality Correction Rs/KL 1410.00 Less : Sales Tax Reduction Rs/KL 1198.00 RTP (Rounded off) Rs/KL 30000.00 LOBS – SN 500 Buildup of RTP as on 1 st July 09