Search the Internet            Tips

India may deregulate oil sector this year

The Indian government may announce in next month's budget, that it will deregulate the oil sector this year, an economic daily reported on Thursday. Earlier, the deregulation was planned only in April 2002.

The government is considering advancing plans to scrap the administered price mechanism or price controls, the daily said.

Private and multinational firms are eagerly awaiting deregulation of the downstream market which would allow them to sell transport fuels like diesel, petrol and aviation fuel directly to consumers.

The move is being spearheaded by top finance ministry officials who are keen to accelerate liberalisation of the oil sector, the daily said, quoting unnamed sources.

Indian oil companies and the government's Oil Coordination Committee (OCC) have been asked to prepare an analysis of the impact of deregulation and an announcement on this is expected in the budget, the report said.

The OCC, which oversees the sector, has been examining whether the sector could be opened up ahead of the deadline approved by the Indian cabinet in 1997.

Subsidies on kerosene and liquefied petroleum gas (LPG), would have to be funded from the general budget, the Economic Times said. The subsidy on kerosene is Rs 7.87 per litre and on cooking gas, Rs 152.31 for each 14 kg cylinder.

India fixes ex-refinery prices of controlled products on parity with international prices. But consumer prices of kerosene, LPG, petrol, aviation and diesel fuel are set by the government.

Petrol and aviation fuel are priced higher to partly offset the subsidies which have resulted in a deficit in the oil pool account forecast to hit Rs 126 billion ($2.69 billion) by March end this year.

Analysts have said that high global crude and oil products prices could derail India's plans to fully decontrol the oil sector. Last year, Oil Minister Ram Naik said that his aim would be to deregulate markets as soon as initial reforms yielded good results.

Tell us what you think of this report