22 May 2024 15:26

Russian govt studying Rosneft proposal to reset fuel damper - dep finance minister

MOSCOW. May 22 (Interfax) - The Russian government is studying a proposal of Rosneft to reset the fuel damper to zero, Deputy Finance Minister Alexei Sazanov told reporters.

"There is no final government decision. The final decision will be for [Deputy Prime Minister Alexander] Novak, for the government to make. We set our position down in writing, that there is an issue related to changes in the timeframe for commissioning certain fixed assets under investment agreements, and prolonging reverse excise tax. They said that if there are any extraordinary circumstances, then the government could be mandated to extend the relevant timeframes. That's all that we wrote," Sazanov said.

It has been reported that Russia's Finance Ministry has not backed proposals to cancel conditions for reducing the damper fuel subsidy to zero until the end of September and expand the range in which fuel prices on the exchange can fluctuate for oil companies to get the payments.

Rosneft CEO Igor Sechin wrote the proposals down in a letter to Prime Minister Mikhail Mishustin, saying that a moratorium on resetting damper payments was needed "for a period of stabilization of the situation" on the fuel market. As an alternative, it proposed to widen the permitted range for deviation of wholesale prices so that the damper does not drop to zero.

The Finance Ministry has said damper's main purpose was to keep fuel prices in the domestic market stable, and the limit set by Tax Code on the extent to which wholesale selling price of motor fuel can deviate from the indicative level of the wholesale price was a means of easing price volatility. The proposed measures to suspend or increase the limit the range in which wholesale prices can deviate will not facilitate price stability in the domestic market, in the ministry's opinion.

However, the ministry "conceptually" agrees with the idea of not reducing the damper to zero if price fluctuations exceed the threshold only for gasoline or diesel.

According to the scheme, the damper will not be reset to zero for the product for which the deviation threshold is not exceeded. The Finance Ministry is willing to draft a regulatory act on the matter if asked to do so by the government.

The damper is paid out of Russia's budget as a subsidy to oil companies in order to hold down domestic fuel prices when there is a high export netback. But if fuel prices within Russia increase too much and deviate from the conditional prices of 58,650 rubles per tonne for gasoline and 55,000 rubles for diesel set in the Tax Code by more than 10% and 20%, respectively, on average for the month, the damper is not paid for that month.