Experts for formula-based approach on petro pricing

February 9th, 2009 - 8:14 pm ICT by ANI  

New Delhi, Feb.9 (ANI): Professor Arjun Sengupta, well-known economist and Chairman of the National Commission for Enterprises in the Unorganised Sector, Government of India, today suggested a formula based approach to ensure stability and predictability in the petroleum product prices.
Delivering the keynote address at a Focus Group Discussion on “Petroleum Product Pricing Reforms: Now Is the Time”, Sengupta said the formula can be developed either by a group or committee.
“There is need for reforms — whether it is today or tomorrow. Every time is important time,” an ORF press release quoted Sengupta as saying at a discussion chaired by S.C. Tripathi, former Secretary of the Petroleum and Natural Gas Commission.
Criticizing the government’’s subsidy policy, Prof. Sengupta said he is of the opinion that HSD (high speed diesel) should be taxed on par with motor spirit (petrol). He said contrary to the claims of transporters and politicians of right, centre and left, HSD prices have miniscule effect on prices of essential commodities.
He suggested that while big farmers do not deserve subsidized diesel, the cases of small and needy farmers should be handled through prices or income.
Saying that Government policy should not discriminate between government and private companies, Prof. Sengupta said there is an urgent need to deregulate entry and exit of companies in the sector. “Oil sector reforms should not be linked to pricing reforms alone,” he remarked.
Tripathi, who had drafted the bill on Regulator in the petroleum sector, said there is an immediate need to give more powers to the Regulatory Board, which is virtually non-existent because of lack of powers to it.
“The Regulator has not come into the picture yet. There is a law. The Government should withdraw,” Tripathi said.
Sunjoy Joshi, Senior Fellow, ORF, warned of a 90s-like situation of shorter supply and higher prices if the present situation of less investment in the upstream continues. He said investments should keep pace and adhocism should be eliminated if uncertainty and unpredictability are to be ended.
Surya Sethi, Principal Advisor (Energy) to Planning Commission, warned that if one tried to control the petroleum prices, it would only mess up things as petroleum is and will continue to a volatile product.
Describing the sector in India as “heavily distorted”, Mr Sethi said petroleum price reforms are interlinked with taxation sector reforms. He said Indians pay highest prices in the world for energy products.
Stressing the need for level playing field in the sector, he also called for empowering the Regulator.
Raghavendran, President of Reliance Refineries, said even China, which had a similar pricing system like India, has changed its policy and has adopted a liberal price band linked price control. He agreed with Prof. Dasgupta on the formula based approach to ensure stability and predictability.
R.P. Sharma, President, LNG Business, Reliance Industries and M.B. Lal, former CMD of HPCL, also underlined the need for empowering the Regulator to ensure a level-playing field in the sector. Mr. Lal also suggested a formula based system to be developed by an independent group or a group formed by the Regulator.
Criticising the government’’s policy of taxing aviation fuel about Rs. 3 while taxing petrol around Rs. 13, Dipankar Mukherjee, Secretary, CITU, said the pricing issue cannot be left to the market.
He said the consumer should know the economic cost of petroleum products while the government should decide on the political cost. Asking what had happened to the so-called ”independent” directors in the collapsed companies, he said the Government should keep the power to regulate prices.
“If the government has to any way step in when the market fails, then why not keep this power with it always?,” he asked.
Manish Tiwari, Congress spokesperson, also favoured the view that the Regulator should be empowered enough to deal with the situation. Saying that the problem is with the taxation structure, he said he cannot visualize any government giving away its taxation power to the Regulator. He said subsidy is a larger governance issue. (ANI)

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