India: More Calls to End Government Fuel Price Controls
|
|
|
|
Thursday, 12 February 2009 |
|
The Indian governent should end state control on fuel prices, taking advantage
of the sharp fall in crude oil costs, a top policy adviser said.
The Indian government fixes the prices of petrol, diesel, cooking gas
and kerosene sold by state firms to control inflation and help poor and
middle-class households. The policy has had a huge negative impact on
state firms such as Indian Oil Corp, Hindustan Petroleum Corp Ltd and
Bharat Petroleum Corp Ltd, and independent petrol retailers such
as Reliance Industries, Essar Oil and Shell.
Crude oil's $100 fall from the peak of $147 in July has helped cut
losses of state firms and encouraged India to cut fuel prices twice in
as many months, and consider price reforms. "It is (the) right time to
get out of administrative price mechanism," chairman of Prime Minister
Manmohan Singh's Economic Advisory Council Suresh Tendulkar told a
conference.
P. Raghvendran, President of Refinery Business at Reliance Industries,
said India should allow free pricing of petrol and diesel and directly
subsidise kerosene and cooking gas.
"We have no escape if the rest of the world is allowing (international
crude oil) prices to get reflected in the consumer price," he said.
In the middle of 2006, Reliance had captured 14.3 percent of the retail
diesel market and accounted for 7.3 percent of petrol sales but its
network of 1,433 petrol stations collapsed as state firms lured
customers with subsidised fuel.
Arjun Sengupta, an economist with the government of India, suggested
that India should adopt a pricing formula that would help make retail
prices stable and predictable.
He said the government policy should not discriminate between government and private companies.
India's policy of subsidising only state-run firms when prices were
high forced private firms to depend on exports, ignoring the market in
the world's second most populous nation. Surya Sethi, principal adviser
(energy) at the Planning Commission, said attempts to control fuel
prices were not sustainable as crude oil prices were very
volatile. He said Indians paid the highest prices in the world
for energy products because of high taxes.
PetrolWorld 090209
|
