Decontrol petroleum prices

Posted on May 3, 2010 | View 1825 | Comment : 21

Before They Control The Fisc

The Empowered Group of Ministers on petroleum pricing, constituted by Prime Minister Manmohan Singh, needs to go ahead and decontrol oil prices without delay. Crude oil prices are clearly on a hardening trend and retail prices of petro-products need to be promptly revised for the greater good. Not doing so and policy pussyfooting over oil pricing would have grave budgetary implications, given the volumes in oil, and fiscal consolidation would go for a six; it would also send wholly wrong price signals across the board. Already, the under-recoveries in oil are projected at over Rs 87,400 crore and rising. In any case, government control and administered prices of oil products is an anachronism from the days of pre-reform and autarky. For years now we have gainfully done away with the perverse practice of administered pricing of steel, cement, coal et al, and we do need market-determined, efficiency prices in the huge, fast-growing oil economy as well. And especially so, as three-fourths of our crude oil demand is met by imports. Besides, multiple expert committees have called for comprehensive oil price reform and the latest Kirit Parikh panel has reiterated decontrol of petrol and diesel prices.
The fact of the matter is that public-sector oil companies are mandated by law to determine retail prices and continuing governmental control is a glaring incongruity in a supposedly reforming, outward-oriented economy. While okaying price decontrol, the ministerial group also needs to iron out continuing policy glitches and anomalies. The taxes and duties on oil products need to be rationalised. Also, the subsidy on cooking gas needs to be phased out and subsidised kerosene proactively substituted with solar lanterns and other green products. It would, in the process, save the exchequer over Rs 20,000 crore per annum, and remove fuel diversion and adulteration. Further, the effective ring-fencing of retail oil sales needs to be done away with, and the duty differential between crude and products removed for a thriving, competitive market for petro-goods. Given the low value-added in oil refining, even a minimal duty differential can mean a large effective tariff protection.

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Comments (21)

  • pricing of petrolium product where import the petrole in india

    Posted by pradeep kumar , petrolium prices at petrolium corporation of india | 10 Nov, 2011

  • I agree that decontrol is absolutely necessary but the
    financial loss of our country now otherwise our country will be a economically poor country the govt will be subsidise of ms hsd immediately free .

    Posted by saroj kumar meher-patnagarh-ra | 16 May, 2010

  • Petroleum products namely MS, HSD and SKO should be decontrolled immediately. Let the Govt., review the Committees recommendation. How long can the Govt subsidise and impact its own Budgetory implications? Although the Administrative Price mechanism hs been decontrolled way back, there still appears an inheent control of Prices by the Govt. Let the price be decontrolled and then one can see mor efficiency in the price and service aspects. Why should Diesel be supplied at a low cost to many Industries who are profitable making the Oil companies sick. Similarly the price of cooking Gas needs to be revised upwards on actual price. The customers can afford to pay the differential in price and it is big hallucinaiation that there will be big Hulla gulla in the market. every one who is using ...See More

    Posted by shankatanks , Area marketing Manager at BPCL | 09 May, 2010

  • De-control of prices of petroleum products is a must, however at the same time some regulatory authority needs to keep an eye on the all such companies that prices are not randomly fixed & only to safe guard the interest of companies wherein they form a cartel and go on to blackmail the market

    Posted by Ajit Kumar Upadhyay , Head Marine Logistics at Oilfield Warehouse & Services | 08 May, 2010

  • In India there is so many controversial policy. Decontrol of Petro Product is one of them. There is Boom in Automobile sector due to govt. policy and resulting boost up in demand of petroleum products. Increase in number of vehicle means spending more and more Dinar / Dollars for import of crude or refine petro products.

    Posted by sujit agrawal , Builder and Developer at Shri Ganesh Developers | 07 May, 2010

  • In longterm for the growth of the nation subsudisation of Petroleum product is not the solution.If necessary, it can be provided to villagers for running the water Pumps or other equipments for agriculture purpose in sameway as Ration cards are being issued and utilised .

    Posted by S.M.Singh | 05 May, 2010

  • Petroleum prices should be immediately decontrolled now otherwise our country will be again become a economically poor country.

    Posted by A.K.BASU , MANAGER at HPCL | 05 May, 2010

  • has to be done without fail at earliest as its a 100% misuse of govt. subsidy which is ultimately going from our pocket only.diesel is being used in luxury cars.petrol price hike will not effect any other commodity rather it will help controlling increasing nos of vehicles & encourage car pooling or public transport.really its need of the hour.

    Posted by pradeep kumar , ASO at HPCL | 04 May, 2010

  • Dont decontrol, we want only subsidised fuel else we will turn against congress in the next election for the first time .

    Posted by k shaji | 04 May, 2010

  • I remember, way back when Rajiv Gandhi spoke about his vision of computerised India, there were political / intellectual detractors, who only saw vanishing job oppurtunities in PSU banks and enterprises. They did not and could not visualise the giant stride that has been taken by Indian Economy on the back of IT / ITES as well as other knowledge based emerging businesses.
    ...See More

    Posted by Neeraj Prakash,|04 May, 2010

  • All 10 comments including my comment earlier so far are in favour of oil/gas price decontrol. Let us argue for a while for continuation of control. Oil price rise after decontrol will raise the costs of transportation of goods and all the people will suffer though the subsidies also increase fiscal deficit and causes inflation in another chain. The great politicians think that inflation through fiscal deficit is better than inflation through petro price rise on decontrol. Second, if petro-prices are decontrolled, when petro-prices rise people will ask for lowering of government duties. Why would government suffer loss of revenue. Third, on decontrol, LPG prices will rise and the middle income families will complain and blame the current govt. If one govt goes, another govt will come. If ...See More

    Posted by Basudeb Sen | 04 May, 2010

  • Yes the petroleum prices should be decontrolled.

    Posted by S.M.Singh | 04 May, 2010

  • Yes the petroleum prices should be decontrolled. This was promised long back in 1992 ans was to take effect in 1995 but the Govt. has backtracked many a times on this. It would surely help to destroy the adulteration industry and reduce the pollution by a certain extent.
    Price competition between Oil Companies would surely benefit the citizens and ensure the Oil Companies become more efficient and technologically advanced.

    Posted by Firdaus Kapadia,Managing Director at FNK Services India Pvt. Ltd.|04 May, 2010

  • Petroleum product shoukd be decontrolled immediately to reduce huge financial loss of our country.Moreover oil marketing cos should be immediately privatised or they should be merged immediately to make only one Govt. oil marketing co. like Indian Railway.

    Posted by A.K.BASU , MANAGER at HPCL | 04 May, 2010

  • Just look at who reaps the benefits of subsidised diesel! We have been paying for the luxuries of the rich. That's ridiculous in a country whose economy is said to be fueled by strong economists.
    And let our OMCs survive. Otherwise if they are allowed to die a silent death, tomorrow would be very dark for all of us.

    Posted by Sravan Kumar Chettry , Drilling Supervisor at BSP Co Sdn Bhd | 04 May, 2010

  • Letting markets determine the prices of petroleum asnd petroleum products is long overdue, not just need of the hour. By not doing so the politicians in Induia has caused serious long term damagee to the people of India. The arguments for not lettig market determines petroeum prices are foolish reasoning by pseudo-socialistic/ pseudo-communistic low quality brains. The same arguments were ignored in the case of food grains, in the case of fish, in the case of vegetable, in the case of rice and wheat, in the case of electricity, in the case of air transport, in the case of price of labor services. Bank interest rates are determined in the market, so is the value of the Rupee. If so many other economies can do with market pricing of petroleum and petro-products, what is the great difficulty ...See More

    Posted by Basudeb Sen | 04 May, 2010

  • Decontrolling of petrol and diesel prices should be done but in phases as its impact on food prices would be disastrous. we should start with petrol and LPG prices. the actual cost of LPG is R 600 per cylinder whereas a consumer pays R 320 per cylindder which stays for a month. Definitely he can pay R 300 per cylinder. Same is the case with Petrol. Having worked with the oil companies for 10 years as external consultant we have seen that the oil companies bleed heavily (LPG - 1,020,000,000 Rupess per Oil Company).
    Similarly why should owners of diesel cars and personal SUV should get subsisdy for diesel?
    Blend alcohol with petrol as done in Brazil( gasohol).
    Increase exploration for indigenous crude and maximise usage of natuural gas

    Posted by Santosh Kumar | 03 May, 2010

  • I agree that decontrolling is absolutely necessary. But because of rule by compromise (as a result of peculiar political situation it may not be possible.

    Posted by garuda dhwajan,Principal at Suparna Associates|03 May, 2010

  • Absolutely agree. Not only will decontrol of oil prices help alleviate the budget and economy fiscally but it will also encourage production and consumption efficiencies. It will give a big boost to alternative energy research and implementations which is simply the right thing to do for the environment.

    Posted by Vivek Anand , Business Associate at IIFL | 03 May, 2010

  • Decontrolling of petroleum prices is a must since
    a) Subsidizing the petrol encourages use of petroleum products more than what its natural market price warrants and creates conditions for escalation of international prices beyond what it would otherwise be based on supply demand and fill the coffers of the petrol producing countries.
    b) It encourages consumption of products which are harmful for environment and responsible for global warming
    ...See More


  • The oil & Gas prices shall be decontrolled with immediate effect. Controlling Oil& Gas prices ( particularly gas)are leading to rampant corruption and black marketing.The subsidized domestic gas for household purpose is being sold to commercial establishments in black market at much higher rate or being refilled in commercial cylinders and sold in open market.

    Posted by Shaik munir Ahmed | 03 May, 2010

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