'Prospect of petrol price rollback to arise in few weeks'

A sharp drop in the value of rupee has added to the woes of the oil marketing companies, who have been under financial strain due to persistently high prices of crude oil in global markets. The rupee fell to a record low of 56 per dollar on Wednesday.

Commenting on the price hike, A K Bhattacharya, Editor, Business Standard, said that the government has been quite clever and astute in timing the increase in petrol prices where a possibility of a roll back will arise in the next few weeks.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: What is the buzz - will there be a forced rollback or do you think Rs 7-7.50 on petrol will stick?

A: As of now, there is no talk of rollback as such. But I think the government has been quite clever and astute in timing the increase in petrol prices at this point of time where a natural possibility of a roll back will arise in the next few weeks.

So this is a politically astute move from the part of the government to have allowed the oil marketing companies to raise the prices by a steep margin. That is a price it is paying for inaction in the last 7-8 months.

If one looks at the India oil basket or even the Singapore oil basket, there is softening of prices. So there will be an opportunity for the government and oil marketing companies to review these prices. I don’t know how they will manage it but they might use this opportunity to reduce or soften the price. The blow, as a result, will be a week or two later, saying that they are reducing the prices. But that will be an astute move. First, you have achieved the first goal of raising petrol prices; but that is not even 20% of job done, 80% remains undone and on that there is a big question mark.

The question is do you want to decontrol diesel prices? Do you want to reduce the LPG price reform that you originally planned to do? The EGoM, which was scheduled for Friday, may not happen because the petroleum minister may not be in town. That is a bigger part of the petroleum pricing reform.

So what is done is it has corrected the distortion UPA had introduced under political pressure. So some signs of political courage but not enough to convince me that policy paralysis completely disappear from this environment.

Q: You are quite certain that the EGoM may not happen tomorrow because the Petroleum Minister is not in town?

A: Yes, although I am not very certain at least the information till late last evening was that there is a scheduled meeting. But one doesn’t know whether the Petroleum Minister will be able to come back in time or not.

Q: What are your expectations from the EGoM; you talked about 2-3 weeks as a timeframe for a possible cut in petrol prices. But that is a very long time given that before that EGoM meet will happen in the next couple of days and diesel will come into the picture. Maybe the opposition cries will be far shriller after any kind of Diesel or LPG move. Do you think the government has the elbow room to wait for 2-3 weeks for petrol prices to come down?

A: I think the government has done a bit of internal political calculations. Some indications were available at a time when the UPA was celebrating its third anniversary. I think they have tried to neutralize its most troublesome alliance partner, which is Trinamool Congress. If one looks at the response from Mamata Banerjee, it’s the most muted response ever to the steepest petrol price hike ever.