Need To Provide Level Playing Field

New Delhi,Mar 8:There is growing unrest among the dealers and employees working in the retail outlets of private oil companies as their jobs and investments are under threat due to discriminatory policies of the Govt which are heavily loaded in favour of PSUs.The threat is affecting nearly 65000 people employed in the sector and large number of dealers who invested Rs. 1.5 - 2.0 crores each in these outlets.

These outlets were set up after the Govt of India notified a new policy for deregulation and marketing of petroleum products at market driven prices.This announcement on 1

April,2002 declared that consumer prices of motor spirit & high speed diesel will be market determined wef that date. Consequent to this policy rights were granted to private players who made heavy investments in order to sell these products at market prices.

But contrary to this policy since mid 2004,the Govt began to intervene and prevent PSU marketing companies from increasing domestic prices as a result of hike in international prices.The Govt also compensated PSU marketing companies through budgetary support in terms of oil bonds & discount given by upstream players like ONGC.This non transparent process compensated PSUs for about 1/3 of their under recoveries on Motor Spirit & High Speed Diesel in 2005-06(Rs. 5931 crores out of Rs. 14964 crores) & fully in 2006 – 2007(est. Rs. 20500 crores).

This private companies were left with no choice but to either absorb huge losses by continuing to sell MS & HSD at same price as PSUs or reduce volumes through price increase.Any attempt to sell products at prices higher than PSU oil companies resulted in no sale.The consumers are also suffering because they are forced to buy from PSUs outlets only.This is also increasing the subsidy burden on the Govt as PSUs have to sell larger volumes.

The only solution of the problem lies in scrapping subsidies & taxes that co-exist along with subsidized LPG and PDS Kerosene.This virtually eliminates the possibilities of participation by private sector.One time reduction in Excise duty can enable Govt of India to eliminate subsidies in all forms & also help in reviving private sector and assure in better customer service through competition.

The impact of any subsequent increase in International prices can be countered by reducing Excise duty by Rs. 300/KL on HSD and Rs. 420/KL on MS for every dollar per barrel increase in international prices or alternatively in steps of Re 1/litre for both MS and HSD for every 3 USD/Bbl increase in International prices.

The other option is to pay subsidy to the private companies also as done in the case of PSU marketing companies.Another alternative is to have fix subsidy per litre which can be adjusted by oil marketing companies in both the sectors on duty payments based on Excise paid with gate passes for removal of products from refineries for domestic consumption.This is the pattern followed in the case of Fertilizer Industry.