In the last week of July, the government agreed to
allow the public sector oil marketing companies limited
freedom to alter the prices of petrol and diesel within
a narrow price band. This will insulate consumers to some
extent from the global petro-product price hike. This
decision was taken at a meeting of the ''cabinet committee
on economic affairs''.
April 2002, when the prices of petrol and diesel were
decontrolled, the oil marketing companies have adjusted
prices of petrol and diesel 24 times. Of this, retail
prices have been raised 16 times and decreased eight times.
Therefore, it was imperative for the government to limit
the increase in the rate of petrol and diesel prices.
Indian Oil Corporation (IOC), Bharat Petroleum Corporation
Limited (BPCL), IBP and Hindustan Petroleum Corporation
Limited (HPCL) have now limited freedom to lower and raise
the prices of petrol by up to 10 per cent of a pre-defined
mean market price (i.e. The mean of the price of petrol
or diesel, averaged over a period of three months, and
the last one year''s rolling average price ) every fortnight.
the demand of the petrochemical companies regarding the
removal of the subsidies on kerosene and diesel fell on
deaf ears this time. The government has declared that,
as far as these subsidies go, their catering to the subsidies
is their social responsibility.
government has informed the petro-companies that though
they were unhappy with the Re1 hike, this hike was insufficient
to cope with the increase in international rate of crude.
fact, it is to enable companies to cope with just such
increases in prices that the government is allowing them
this limited degree of freedom. Most probably, the limit
has been put so as to allow the consumer the requisite
time to adjust to the change and also to set a baseline
and limit for the increment in the rates.
price band limitation can be a boon as well as a bane.
This is because If the prices of petrol rise steeply,
then the oil marketing companies will be forced to sell
at a price lower than the international price. But if
the price of petrol falls steeply then the companies stand
to gain because they can charge rates higher than the
issues that were discussed in the meeting included the
issue that, in trying to cope with the subsidies on LPG
and diesel the Oil and Natural Gas Commission was bearing
heavy losses. Regarding this the committee has yet to
decide which path to follow. Three solutions to this problem
were outlined of which the first was that the oil companies
could bear the burden, the second was that the burden
would be passed to the consumer in full and the last option
was that the Finance Ministry be approached for relief.
does come across clearly is the fact that this has the
ability to be a boon and a bane for the consumer and the