Draft energy policy for full price competition all levels

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New Delhi, Oct 3: The draft report of expert committee on energy policy has called for implementation of comprehensive reform package for the oil and natural gas sector which should include pricing, regulation, industry structure and subsidy. It has also suggested instituting an independent regulatory body for upstream and downstream activities.

The committee headed by Planning Commission member Kirit Parikh believes that adopting a comprehensive package is better than going in for a piecemeal approach.

For petroleum products, the draft report calls for full price competition at all levels or full price competition at least “at the refinery gate and retail level”.

The report has noted that petroleum products are priced at international parity without any competition among incumbents and then loaded with taxes and levies. “As a general rule, all commercial primary energy sources must be priced at trade parity prices at the point of sale. Once full price competition is permitted, the need for building up costs on a normative basis, as being currently done, would be obviated and efficiency gains will show up in procurement/pricing,” it said.

On the issue of subsidies, the report proposes to bid out available subsidies for liquified petroleum gas (LPG) and kerosene against access to targeted benefits.

For non-traded goods, the report said these have to be handled differently. “Prices of non-traded commercial energy supplies can be determined through competition among different producers (this presumes multiple sources and a competitive supply-demand balance) or independently regulated on a cost plus basis including reasonable returns (where competing supply sources are absent and/or demand exceeds available supply). A final option could be to price these non-tradable energy supplies on a net-back-basis,” it added.