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Finmin rejects watchdog role for oil ministry post-APM

Pradeep Puri

The finance ministry has turned down the petroleum ministry's proposal to regulate retail prices of petrol and diesel during the initial years after the dismantling of the administered pricing mechanism.

The finance ministry has said any such move will be against the tenets of free market and is not acceptable.

In a Cabinet note on dismantling of APM, the finance ministry has suggested that oil companies should be given the freedom to fix their margins as well as commissions of their dealers and distributors.

The government-appointed regulator should intervene only when it finds the companies or the dealers resorting to profiteering.

The petroleum ministry had suggested that profiteering by companies, dealers and distributors during the initial years could be handled by having regulated prices.

Regulated prices, it argued, would reflect the actual costs linked to the international market together with the ceilings on company margins and dealers' commission, which, in turn, would be determined by the regulator.

However, in the Cabinet note, the finance ministry has said profiteering by companies, dealers and distributors after the APM dismantling will be checked by following a few steps.

One, by allowing oil companies to fix their own consumer prices, margins and commissions, but making it obligatory for them to prominently display for the information of consumers the maximum prices of the retail products.

Two, by asking oil companies to declare to the regulator their maximum retail prices in accordance with the regulations framed, and finally, by authorising the regulator to intervene whenever it found the pricing unreasonable.

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