Time is ripe for oil policy change

Time is ripe for oil policy change
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First Published: Thu, Jan 07 2010. 12 55 AM IST

Seeking change: Economist Kirit Parikh. Rajkumar / Mint
Seeking change: Economist Kirit Parikh. Rajkumar / Mint
Updated: Thu, Jan 07 2010. 12 55 AM IST
Mumbai: The contentious issue of fuel pricing in India has come to the fore yet again with the Kirit Parikh committee close to submitting its report to the government. In an interview, Parikh, chairman of the Committee on Pricing and Taxation of Petroleum Products, says it is time for a change in oil policy. Domestic prices of fuel need to be closer to international prices, Parikh said. Edited excerpts:
There have been many reports in the past from panels such as the Rangarajan committee and the Chaturvedi committee, but we haven’t seen any great implementation along those lines. From your conversations with people in New Delhi this time, does it appear that the likelihood of implementation of your report is greater?
Seeking change: Economist Kirit Parikh. Rajkumar / Mint
I certainly believe so. I think the time is ripe and earlier the two committees’ reports became sort of obsolete when the international environment changed and now we know that international environment can change in a dramatic manner and we should give recommendations which should be valid in the kind of environment that we can face. I should clarify that we have not yet finalized the report, we have not yet arrived at a set of conclusions. We have discussed various alternatives on how to do that.
Can you tell us when your final report will be out and when you intend to submit it to the oil and finance ministries and the Prime Minister?
Our target is to submit the report before the end of this month.
You were part of the Rangarajan committee that submitted its report on fuel pricing. Is this report significantly different from the recommendations made then?
That committee report said “ask for trade parity prices”. This is also the recommendations that we had made in the integrated fuel policy committee report which is also now part of the government policy. So we will certainly suggest policy recommendations in which the basic objectives of our policy should be quite clear.
We cannot divorce domestic prices too much from international prices because 80% of our oil is imported and that content of our domestic consumption will keep growing. So it is quite clear we need to have some relationship with international prices. We should also do it in a way that we meet our social objectives of protecting poor consumers one way or the other. But do it in a way that does not affect the health of the industry.
On diesel pricing what are your own thoughts on how pricing should be readjusted or relooked?
There are (a) couple of issues here and I would not like to tell you what the committee is thinking about, but I can tell you what issues we are concerned about are. On the one hand, diesel is an intermediate product. If you increase the price of diesel, you have a certain cascading inflationary impact on the economy and that is a matter of concern. On the other hand, if you regulate diesel prices then you have the problem of who is going to fund the difference and if it’s going to be the companies, then the companies become non-viable; if it’s the government then the government would have to find ways and resources by which it can do it.
The choices are between two very difficult alternatives, but we will find a way.
cnbctv18@livemint.com
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First Published: Thu, Jan 07 2010. 12 55 AM IST
More Topics: CNBC-TV18 | Oil | Fuel | Kirit Parikh | India |