Diesel price hike is a welcome move: RS Pandey

In an interview to CNBC-TV18, former oil secretary RS Pandey says a clear roadmap and a precise formula for a longer period would have been much more welcome. "Nevertheless, it’s a welcome decision. The government has to balance the risks of the consumers and the oil companies and its own revenue and bring about some kind of a balance on an adhoc basis," he adds.

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Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy.

Q: Are you happy with the formula or would you have expected a more durable roadmap to tackle the under recovery problem, not a one-off solution as we have seen?

A: A clear roadmap and a precise formula for a longer period would have been much more welcome. But under the circumstances, even with this small increase compared to the under recovery, there is so much of resentment.

The government has to balance the risks of the consumers and the oil companies and its own revenue and bring about some kind of a balance on an adhoc basis. Nevertheless, it’s a welcome decision, atleast something has been decided. That was long overdue.

Q: Given the political compulsions that the country has been plagued with, would you not be surprised to see any kind of roll back in the diesel price hike?

A: Anything can happen. But it’s very difficult because it is not even in line with the losses that the oil companies had been suffering. Either government subsidises itself or increases the price. Where is the room for the government to subsidise at the present juncture? One understands the amount also had not been voted. So, the budget also is not in a position to support the oil marketing companies. Oil marketing companies have reached a situation where borrowing limits are almost going to be exhausted. So, then what was the alternative?

If you procrastinate, you rollback then you are not in a position to subsidise then a more unfortunate situation might come. The country’s energy security will be in peril, the oil marketing companies will not be able to buy crude, not be able to refine and that will be a disaster.

So, under the circumstances, the least that was possible for the government to bring about some increase in diesel prices has happened. We all have to understand this.