The honourable Petroleum mister Mr Moily reiterated at a CII meet held last week that government would deregulate prices of diesel by May 2014. He also mentioned categorically that there would be no one time increase as was being talked about earlier. Were his comments to captains of industry to simply assure that the government wants to keep deficit and subsidies under control? Or was it one more attempt to fool the nation at large.
The current price differential is Rs 10 per litre of diesel towards under-recoveries. Between end of November and May there are a mere 6 months and the current 50 paisa per month would at best fetch Rs 3 per litre. This of course is also assuming that with effect from today the Indian Rupee and crude prices continue to remain where they are, or do not impact India adversely. This logic also falls flat as elections are to be held in the month of April and May 2014. This means that effectively the polls would get notified sometime in the beginning of March 2014. This gives the government and Mr Moily a mere 4 months which means Rs 2 at best. Would Rs 2 bring diesel prices to market driven and therefore become deregulated?
Very clearly the talk that one has heard of moving diesel to market levels is and will always remain on paper. There is no intent to do so. The funny part is that diesel is not used directly by the common man as it is not used to drive rickshaws or scooters. It is used for running railway engines, state transport buses whetherintercity or intra city. These categories of users are already paying bulk rates and are not getting subsidies. The transport section which consists of small truck owners and buses and use the services of petrol retail outlets would have to pay higher prices. This could lead to some more inflation but is a necessary evil and needs to be done. We need to stop subsidising the diesel guzzling SUV’s of this nation.
It may be of interest to note that ONGC realised gross realisations of $109.01 per barrel of oil but after discounts, levies and other taxes had a net realisation of a mere $ 44.84 per barrel of oil. We have a case of a producer or explorer of oil earning or realising less than half the fair value of crude it explores because of the discount it has to offer. The refiner has to pay higher interest as the government does not release the under recoveries amount in time. It’s a double triple whammy for these companies and as a nation one feels sad about it.
How long can we have the oil marketing companies like IOC, HPCL and BPCL bleed? Refining and retailing companies globally are making good money and there is no reason why these companies should be reduced to a state where they have to go to the government with a begging bowl to survive. Even oil exploration companies ONGC and OIL India have to share the subsidy burden which makes these companies that much weaker in their mission to ensure India energy security.
The divestment of IOC which India wants to do is suffering from valuation pangs. Since the last 5-7 years one hears the diesel deregulation call again and again and it has become yet another case of crying wolf.