Reforms in oil sector before polls

Roadways buses likely to get subsidised diesel

More reforms may be introduced in the petroleum sector ahead of the upcoming general elections.

After a halt on direct transfer of LPG subsidy to beneficiaries accounts, the ministry is now contemplating the same for kerosene subsidy as well. However, in another populist measure, it may allow roadways buses to avail subsidised diesel. These were earlier classified as bulk buyers and were charged market price for bulk buyers.

Incidentally, these reforms were late starters but are being written off pretty early. It was only in January last year that the oil ministry, struggling to control the import bill due to rise in global crude oil prices and weakening of the rupee, had taken a decision to charge market price for diesel sold to bulk buyers such as defence, Railways and transport corporations.

But the wide difference between the bulk and retail prices of diesel started to push several State road transport undertakings to start sourcing fuel from retail outlets instead of depots. Now, the government is planning to scrap the distinction altogether, a senior oil ministry official said, adding there may be partial rollback in bulk diesel prices.

In January 2013, when the decision on charging bulk buyers at market price was challenged by transport corporations in the Madras, Kerala and Andhra high courts, Attorney General G E Vahanvati had pleaded before the Supreme Court that the national pricing policy was being sought to be dislocated. If this was done, oil companies would not be able to survive under the load of subsidies. They would fold up.

Exactly a year after, apparently without giving much thought to the fate of oil companies, the government increased the quota for LPG cylinders, refrained from taking a one-time hike in diesel prices and also went ahead to cut CNG and PNG prices – all at a time when general elections are a little more than two months away.

As for the direct transfer of kerosene subsidy to beneficiaries’ account, the scheme which is in its last leg of finalisation for the country, may not take off at all. After the abrupt end to the direct benefit transfer for LPG scheme, the oil ministry is planning to put a halt on the similar scheme for kerosene too. The government had already launched the scheme in Ajmer and Udaipur districts in Rajasthan last year on a pilot basis.

The oil ministry had planned to save up to Rs 20,000 crore towards subsidy on kerosene through this scheme.

When asked about the pace of roll back in the reform measures, an official of the ministry merely said, “It was wrong to call it a roll back. It was only a rationalisation of the schemes.”

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