In the case of naphtha, its price has reduced by 8.3 per cent from the levels in March this year when the oil sector still had not opened up. It has fallen further from April 1 when prices of the deregulated products were announced. Naphtha's ex-storage price in September is Rs 6,820 per tonne, substantially lower than Rs 7,440 in March and Rs 7,072 in April (when deregulation officially kicked off).

The price of LSHS has also fallen considerably by 8 per cent to Rs 5,020 per tonne in September from Rs 5,450 in March. The oil companies had announced that it would cost Rs 5,070 as on April 1 (ex-refinery) when the oil sector first opened up.

Furnace oilis today Rs 4,700 per kilolitre, a welcome price tag when one compares the price in March which was Rs 5,050 per kilolitre. The net reduction has been close to 7.5 per cent. The six months of deregulation have seen a further fall of only Rs 100/kl but experts of the oil sector say even this is considerable as user industries stand to gain enormously.

LDO's price reduction may not seem so significant compared to the other three petro-products but even here the net fall from March has been Rs 240 per kilolitre. And if world prices continue to fall further, it would only reflect in the scenario back home which would be heartening news to the industry.

"The six months have shown that the move towards market-determined pricing mechanism is not such a bad deal after all," observers say. The process has been undoubtedly helped by world prices of crude and petro-products showing a downward trend. "Still, it should be remembered that these benefits would not have been passed on in a regime of administeredpricing," they add.

The user industries for these products include petrochemicals, fertilisers, agriculture, power, shipping, cement, tyres and many others. They would stand to gain further if world prices dip further though the flip side remains that a firming up would translate into paying more. "Even if this happens, industry would be willing to bear the pinch," sources said.

The reforms process follow the recommendations of the Nirmal Singh committee. Effectively, by 2002, the oil sector will be completely deregulated. The committee, in its report, had stated that "the benefits of a move to MDPM in general and more rational price structure in the hydrocarbon sector, in particular, for other sectors are potentially large."

It had also dismissed fears of high prices consequent to freeing the sector. "The fear of inflation because of a move from APM to MDPM is completely misplaced. International experience in other countries which have made such a move in the recent past suggest that while the pricerise because of the liberalisation is modest, the efficiency increase is substantial."

The committee added that efficiency enhancements associated with a move from APM to MDPM would be to the benefit of all concerned. "The indirect benefits through better utilisation of hydrocarbon deposits, higher oil security, a more efficient allocation of resources in the country and hence better employment opportunities and higher income will far outweigh the direct costs."