As a member of Parliament quipped, ``which government in its right senses will raise oil prices in an election year ?'' The mood in the corridors of power substantiates market assumptions that administered prices would probably not be touched till the general elections were over, not even if the spurt in world oil prices jeopardised projections about amortising oil bonds out of the oil pool account.

The immediate revision of diesel prices should reflect world market rates, which climbed to $119 a tonne in April (from $82 a tonne when crude prices were nine dollars a barrel.) In May high speed diesel (HSD) prices dropped to $113 a tonne, only to climb back to $115.85 a tonne in the first week of this month.

Diesel should also turn dearer, when the Oil Coordination Committee (OCC) opts for ``spot'' rates, instead of negotiatedprices in determining diesel prices at home. That should happen when Reliance Petroleum brings the output of its gigantic refinery (estimated to be among the largest in the world) into the market.

Union minister for petroleum and natural gas, Vazhapadhy K Ramamurthy does not see the need to revise oil prices now, even though worldwide petroleum product prices have moved up in tandem with crude oil prices since end March. Ramamurthy says that the Cabinet decision of April 1, 1998 (to relax state control over several petroleum products prices) only necessitated a diesel price revision once a quarter.

In the petroleum ministry's scheme of things, therefore, the 3.5 per cent increase in high speed diesel (HSD) prices on April 19, had already done justice to the spurt in crude oil and petroleum products prices worldwide.Diesel prices also deserve a re-look, because high speed diesel (HSD) prices were aligned to international rates when price reforms in oil prices began in September 1997. Diesel prices werereduced by more than 10 per cent in February when crude oil and so petroleum products prices crashed worldwide and hiked again in mid April when world oil prices firmed up.

Diesel prices are being examined closely for yet another reason. Since September 1997, when the Union Cabinet decided on ``import parity'' rates for diesel and withdrew the 25 per cent subsidy on the mass transport and power plant fuel, diesel prices have been pegged to the rates at which canalising agency Indian Oil Corporation (IOC) buys the fuel in the world market.

The canalised imports are mostly through long-term contracts and negotiated prices, which naturally are more favourable to the customer than ``spot'' prices. The negotiated price rates should vanish once diesel imports stop and imports should stop as soon as Reliance Petroleum's mammoth oil refinery at Jamnagar goes on stream.

The refinery, estimated to have a capacity of 27 million tonne has already begun trial runs and is expected to offload some products into themarket by the end of next month. Considering that India only imported 10.49 million tonne of diesel last year and the Jamnagar refinery should produce at least that much HSD, the Oil Coordination Committee (OCC) will not have any ``negotiated prices'' to refer to in fixing diesel rates.

An exercise has begun in the petroleum ministry and the OCC to evolve a formula for the ``import parity'' rates of diesel. Should the think-tanks in government decide on the international selling prices or ``list'' prices (reflecting ``spot'' rates,) diesel will cost more at home. That exercise is not complete.

In any case any formula that enhances returns from diesel to the oil companies and so pinches customers, is likely to gather dust till the political climate is ready for hard decisions once again.

The Reliance Petroleum output should lead to a complete self-sufficiency in diesel within the country. Essar Oil's nine-million-tonne refinery, expected to be commissioned next year, will then probably cause a glut. Thehuge diesel surplus will probably necessitate diesel exports, or compel oil companies to change the product mix of their refineries.

The happy ending to the tale of India's oil security is wrought with bumpy questions. The first concerns the commissioning of the Reliance Petroleum refinery, which is believed to have some problems in receiving crude at its single buoy mooring system (SBM). Industry sources say a refinery of the size of the Jamnagar plant would not be easy to commission.

``Indian Oil's Panipat refinery (with a capacity that is a third of the Jamnagar plant) took nine months to commission,'' said an industry source, ``and we are talking of one of the largest refineries in the world.'' Till the Jamnagar products actually come into the market, the Centre will have to continue to budget for imports. As long as imports continue, the ``import parity prices'' for diesel persist as well. ``Brouhaha over diesel prices may get drowned in pre-poll fuss'.