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Govt to abolish investment norm for fuel retailers

business Updated: Aug 01, 2007 20:37 IST
Deepak Joshi
Deepak Joshi
Hindustan Times
Govt may remove

The government is considering the abolition of the minimum investment requirement of Rs 2,000 crore for petroleum companies to take up retail marketing of transportation fuels. The minimum limit was fixed to ensure that “only serious players” could have access to the growing Indian transportation fuel market.

The issue had figured in the integrated energy policy recommendations for the petroleum and natural gas sector.

In various detailed appraisals, Planning Commission is of the view that the regulator can easily ensure that fly-by-night operators do not enter the retail sector even without such an investment hurdle. The Petroleum Ministry is also agreeable to lifting the investment requirement of Rs 2,000 crore.

However, no timeline for removing the floor limit has been decided yet. The issue may be referred to the Energy Coordination Committee (ECC), headed by Prime Minister Manmohan Singh, for a final clearance, government sources told the Hindustan Times.

The ECC is also expected to take a view on the recommendations of Committee of Secretaries on pricing of gas from deepwaters in the Krishna-Godavari (KG) basin. The committee is reported to have favoured market-driven prices for the gas.

The committee of secretaries comprised Expenditure Secretary Sanjiv Misra, Power Secretary Anil Razdan, Fertilizer Secretary J Sreedhara Sarma, Petroleum Secretary MS Srinivasan and Legal Affairs Secretary TK Viswanathan.

The Planning Commission has also stressed the need to opt for a full trade parity price and urged the petroleum ministry to indicate a timeline for instituting it. “Full price competition at the refinery gate and retail level should be the ultimate objective since the administered price mechanism regime has been dismantled,” states a note on the issue.

The Rangarajan committee had recommended a weighted average of import parity and export parity prices in the ratio of 80:20. However, it was contended that trade parity pricing should ideally be a short-term measure.

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