The much talked about scheme of de-regulating the pricing of petroleum products like petrol, diesel, cooking gas and kerosene has clearly been put on the backburner.
Given the political impact of such a decision, Finance Minister Pranab Mukherjee, in his budget speech, refrained from making any commitment to a market-determined pricing regime for petroleum products.
Instead, he announced the constitution of another expert panel to advise the government “on a viable and sustainable system of pricing petroleum products”. It remains to be seen what recommendation this panel makes that is different from what’s already been said by similar expert groups in the past.
In recent reports on petroleum product pricing in India, two such groups had submitted a detailed roadmap on dealing with the impact of the volatility of global crude prices. They found no takers in the government.
Mukherjee, however, noted that with almost three-quarters of India’s oil consumption met by way of imports, domestic prices of petrol and diesel will have to be brought in sync with global prices.
Experts are of the view that what is required is political will to take some tough economic decisions, rather than going from one committee to another.
“Setting up an expert committee is a welcome step. However, what is required is implementation of the recommendations,” said Mukesh Bhutani of BMR Associates.
“Implementation of recommendations made in the economic survey on limiting LPG and kerosene subsidy, giving pricing freedom to oil PSUs is what needs to be done.”
Currently, the pricing of sensitive petroleum products in India is highly subsidized.
In 2008-09, the government provided for over Rs 1 lakh crore in subsidy by way of oil bonds and through assistance from some cash-rich PSUs. For the current financial year, the petroleum ministry has already announced a Rs 30,000-crore subsidy on cooking gas and kerosene by way of oil bonds.