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Wednesday, Apr 21, 2004

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Petroleum Ministry's assurance to EC on oil prices

By Our Special Correspondent

NEW DELHI, APRIL 20. The Petroleum Ministry has informed the Election Commission, in response to a query, that decisions on oil prices are now taken by public sector companies on their own. This assurance was given after the Commission forwarded complaints received by it on petrol and diesel prices being kept artificially low to improve the ruling party's electoral prospects.

The Commission today clarified that it had not sent the query on its own, but had merely forwarded complaints received by it on this score. The EC spokesperson said that the Petroleum Ministry was asked to respond within seven days on the complaint. He said it was one among the hundreds of complaints received by the Commission on various electoral issues.

The Ministry, on its part, is believed to have pointed out that after deregulation, the decisions on oil prices are now taken by the companies on their own. Despite this factual response to the commission, oil industry sources insist that in actual practice, the dismantling of the administered pricing mechanism (APM) has not given much freedom to the public sector companies. They continue to rely for guidance from the Central Government, which naturally prefers to keep price hikes in abeyance at times when electoral fortunes hang in the balance.

The complaints received by the EC follow several reports that oil companies are seeking a hike in prices as a result of hardening of international crude oil rates. The companies have made it clear that they are keen to go ahead with a hike of at least Rs. one or Rs. two per litre in a bid to reduce the losses on account of higher world prices.

The Ministry, on the other hand, argues that the oil companies' profits are soaring despite the rise in world crude oil prices. In the case of the market leader, the Indian Oil Corporation, it has noted that profits have surged by 31 per cent in the first nine months of the last fiscal. Similarly, the net profit of Bharat Petroleum Corporation Limited (BPCL) has shown a spurt of 59 per cent and that of Hindustan Petroleum Corporation Limited (HPCL) by 52 per cent.

Oil companies, in contrast, insist that the burden of a rising world prices is added to by the need to shoulder the burden of subsidy on kerosene and LPG. Prices of these two subsidised products have not been revised since 2002 and the oil marketing companies are bearing the burden along with the Oil and Natural Gas Corporation (ONGC) and the Gas Authority of India Limited (GAIL).

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