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Run up to dismantling of petro APM -- Allot retail outlets based on refining capacity: Panel

Balaji C. Mouli

NEW DELHI, May 27

THE Group on deregulation of marketing of controlled petroleum products has recommended that during the transition period leading to the scheduled dismantling of the administered pricing mechanism (APM) in April 2002, the new players should be allotted r etail outlets in the ratio of their refining capacity.

Currently, IOC has the largest refining capacity followed by Reliance Petroleum which has built up a capacity of 27 million tonnes. The remaining players in the market do not stack up to this aggregate capacity.

The Petroleum Ministry committee, which recently submitted its report, has argued that the existing practice of sharing retail outlets in the marketing plan on the basis of the existing market share cannot be applied.

The committee, which has identified issues, recommended solutions and outlined timeframes involved in dismantling the APM, has said the Government would require to lay down guidelines for converting investment in other eligible areas into equivalent refi ning capacity and lay down the basis for drawing up a supplementary marketing plan before June 2001.

The committee has mooted a ceiling selling price for petroleum products of mass consumption -- petrol, diesel, kerosene and LPG -- for all the regions.

The committee has argued that such a system prevailed prior to the introduction of the APM, when private companies were operating in the country. The objective of this move would be to avert any sudden price shocks. The deadline for completing this task has been pegged as December 2001.

To avert `cherry picking' of attractive markets, the committee has recommended that the Government lay down guidelines for allocation of retail outlets to all eligible players by December 2001.

The committee has voted in favour of allowing the private sector to sell subsidised petro-products in the post-APM period -- kerosene and LPG.

In this regard, it has recommended that a mechanism be set up for administering subsidy for these two products in the post APM period.

The committee has said that the mechanism would need to be finalised in consultation with the Finance Ministry and State Governments by December 2001.

However, with the prevailing high crude prices, the issue of dismantling the APM appears to be difficult unless the Finance Ministry cuts duties on crude and products.

Further, the entry of new entrants during the transition period may face severe hurdles owing to the lack of growth in consumption of mass consumption petro-products.

Save aviation turbine fuel (ATF) and petrol, the remaining products -- kerosene, LPG and diesel have witnessed stagnant or negative growth during this quarter, industry sources said.