The oil marketing companies (OMCs) could easily afford to bring down the price of petrol by at least Rs 2-2.50 per litre, says energy expert Narendra Taneja.
Talking to CNBC-TV18, he says that petrol accounts for nearly 10 percent of total petroleum products of these companies, which have not increased the price of diesel as was expected. So, the result is that in a way, petrol consumers are being asked to subsidise diesel consumers.
Here is the edited transcript of his interview with CNBC-TV18
Q: What do you make of oil marketing companies and petrol pricing because international crude prices are down from USD 119 to USD 116. That is what they factored in when they decided to cut petrol prices last night. The rupee has depreciated at the fortnight ending the April 15 only about Rs 0.77, yet only a Rs 1 price cut?
A: Honestly, it is not justified. The companies could easily afford to bring down the price of petrol by at least Rs 2-2.50 per litre. However, don’t forget one thing. Petrol accounts for nearly 10 percent of total petroleum products of these companies and they have not increased the price of diesel as was expected. So, the result is that in a way, petrol consumers are being asked to subsidise diesel consumers. So, that has been the practice and that has been the policy for a long time, which unfortunately seems to be continuing. However, left only to petrol, I think that they could easily afford to reduce the price as I said earlier by Rs 2-2.50 per litre and ideally they should have done it.
Q: Let me talk to you about what is happening on the bulk diesel front because OMCs are suppose to charge bulk diesel consumers market rates. Yet, OMCs are not tweaking prices with the international crude prices or even with the Indian basket. The Indian basket today down to below USD 100 a barrel for the first time since June 2012 so why should bulk consumers not get the benefit, why do they need to wait for a fortnight to avail of this benefit and you don’t know what is going to happen in the interim?
A: It is basically a policy and don’t forget at the same time the bulk consumers are also there to start with, like our Indian Railways, ministry of defence, state transport utilities, etc. So, when you look at the list of bulk consumers you find that basically almost 30-35 percent are state-owned or state-controlled entities. So, there is something that needs to be rectified. Right now, let us not forget one thing that there is also a lot of communication gap when it comes to between OMCs and also these bulk users. There is no clarity one, especially when it comes to bulk users controlled by various state governments. There seems to be a lot of communication gap between the OMCs and the state governments. At the railways and the ministries defense I think they have taken care of the problem to a very great extent but as far as the others are concerned and especially non-government or the private bulk users are concerned there is a lot of ambiguity and there is lot of communication gap. That is why we see that they are not able to take the kind of advantage that they could have.
However, having said that, I personally feel that unless we go for a complete deregulation of diesel in true sense of the term these ambiguities, these issues, these problems would remain, because companies are not empowered and at the same time there is not enough literacy on the part of some of the bulk consumers and for that matter other consumers. That is why sometimes you see this ambiguity and you see that bulk consumers are in the process of losing.
Q: As per your calculation, what is the current under recovery and what is your projection for the year end figure?
A: When you look at the under recovery in terms of diesel we are still talking of something like Rs 80,000-82,000 crore. When it comes to the year end unless the government really sticks to the original policy which it had announced earlier, the number may probably be going more or less in the same region. Because if the indication is that they have basically stopped increase in prices of diesel, then we are talking of completely different economics. We are talking of a completely different policy direction and we would probably stop at about Rs 80,000-82,000. However, if there is no policy correction immediately or the price correction then basically we will go back to the same direction that is about Rs 96,000-98,000 subsidy only on diesel, not to talk about other products such as kerosene.