Paying the price at the petrol pump

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With the government lacking the will to take tough decisions for the country’s oil sector, reports by expert committees, like the most recent one headed by the member Planning Commission, BK Chaturvedi, on the financial position of oil companies—will soon become meaningless.

Before the Chaturvedi committee, it was the expert committee headed by C Rangarajan in 2006—which came out with some path breaking suggestions to correct the taxation and pricing anomalies in the oil sector. However, as the government decided to overlook most of the suggestions made by the Rangarajan committee, the identity of the report is like any other document in one the dusty racks of the Shastri Bhawan.

The fate of the Chaturvedi committee report will be no different, even though the committee was constituted by none other than the Prime Minister Manmohan Singh to resolve the crisis existing out of high international oil prices. Witness the initial comments to the recommendations of the Chaturvedi panel. Petroleum minister, Murli Deora said, “It will be premature to assume that the suggestions made by the committee were being implemented. We have to do a serious analysis even before we think of implementing it.” Deora’s perceptions of the recommendations made in the report is evident.

Another cabinet minister said, “There is no chance that prices of fuel will be increased. With inflation at its highest level and this being an election year, how do expect us to take such unpopular decisions.”

While there is no denying the fact that at a time when inflation has crossed the 12% mark, it is nearly impossible to immediately raise the consumer price of petrol and diesel monthly by Rs 2.50 per litre and 75 paise a litre respectively, as suggested by the Chaturvedi committee.

However, the committee suggestion that the government should disengage itself from the process of pricing of petroleum products, and allow pricing to be an outcome of a competitive market process needs to be followed gradually.

Another recommendation, which will also die a natural death, is the one relating to restricting the entitlement to subsidised LPG supply to 6 refills in a year. In the subsequent year, the committee said this supply be further reduced to 4 refills and in the next two years to 2 and nil respectively. It is estimated that the average number of refills per household presently is 7.43.