The Hindu : Oil industry moves to new decontrolled era

Online edition of India's National Newspaper
Tuesday, Apr 02, 2002

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National

Oil industry moves to new decontrolled era

By Our Special Correspondent

NEW DELHI April 1. The country today moved to a new era of free pricing in the petroleum sector after 30 years, with the dismantling of the administered pricing mechanism.

Petrol, diesel and other industrial petroleum products will be sold at market-determined rates by the oil companies, while the Government will continue to provide a subsidy of Rs. 3 a litre for kerosene supplied through the public distribution system and Rs. 90 for cooking gas.

The APM which was created after the Government nationalised the international oil majors, Caltex, Esso and Burmah Shell in the early 1970s, has been done away with, along with the complex system of oil pool accounts which was administered by the powerful Oil Coordination Committee (OCC).

The OCC has now been reduced to a planning and analysis cell in the Petroleum Ministry. Oil companies can fix prices according to import parity.

Both the Petroleum Minister, Ram Naik, and the Indian Oil chairman, M.S. Ramachandran, have already assured the consumers that prices will remain unchanged for the next few months.

This decision has been taken to ensure price stability despite the firming up of world oil prices. At the time of the Budget presentation, the prices were three to four dollars a barrel lower than at present, which would have actually meant a decline in prices of petrol. The hardening of prices in the international market has reversed this situation and the oil companies have agreed to maintain price stability, despite the impact on their bottom lines.

As part of dismantling the APM, the Government today announced that the Reserve Bank of India has been issued sanction to make a payment of Rs. 9000 crores to oil companies, against a part of their dues in the oil pool account.

The payment will be made through an issue of "6.96 per cent oil companies' Government of India special bonds, 2009''.

The oil pool account is estimated to have a deficit of nearly Rs. 13,000 crores. Indian Oil Corporation (IOC) leads the list with bonds worth Rs. 5276 crores, while the Hindustan Petroleum Corporation has been issued Rs.1481 crores worth of oil bonds, Bharat Petroleum Corporation with Rs. 1018 crores, Oil and Natural Gas Corporation (ONGC) with Rs. 961 crores, Oil India Limited with Rs. 107 crores, Bongaigaon Refinery and Petrochemicals with Rs. 56 crores, Numaligarh Refinery with Rs. 46 crores, Kochi Refinery with Rs. 37 crores, Chennai Petroleum Corporation with Rs. 12 crores and Gas Authority of India Limited with Rs. 6 crores.

The remaining deficit in the oil pool account will be liquidated after an audit by the CAG.

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Oil industry moves to new decontrolled era