Pvt oil retailers feel the PSU heat;Ruia, Ambani & Mehta to meet PM
The oil pricing practices of PSUs have brought together private sector rivals Reliance Industries, Essar and Shell India on the same platform to petition Prime Minister Manmohan Singh against “predatory” fuel pricing by public sector units.
By PTI |
NEW DELHI: The oil pricing practices of PSUs have brought together private sector rivals Reliance Industries, Essar and Shell India on the same platform to petition Prime Minister Manmohan Singh against “predatory” fuel pricing by public sector units.
Even as the government is debating on the means of neutralising the impact of galloping global crude prices on oil PSUs, RIL chief Mukesh Ambani, his counterpart in Essar Shashi Ruia and Shell India chairman Vikram Mehta have sought time from Mr Singh to express their “concerns”.
The three bigwigs, who set up petrol pumps to sell petrol and diesel when government opened up the sector, have seen their combined market share fall from 15% in April 2006 to only 1% in September 2006.
“The predatory pricing policy of the PSUs is against competition policy and, given the price sensitivity, it has led to a collapse in the market share of the private companies,” the three wrote in a joint letter dated August 16.
The government, they said, has administratively kept the selling price of petrol and diesel below the cost.
Private retailers sell fuel at close to cost price, making their retail price costlier then the public sector competition.
Indian Oil, Hindustan Petroleum and Bharat Petroleum get compensated for selling fuel below cost through a
The government is keeping fuel prices lower than cost despite its own notification that the prices of petrol and diesel would be determined by the market.
“Had the government followed the Rangarajan Committee’s recommendations the domestic selling price of petrol and diesel would on average have been Rs 1,600 per kl and Rs 3,700 per kl higher respectively over the 2006-07,” the trio wrote to the prime minister.
Private refiners, they said, have been forced to export their entire production, which has resulted in a loss of Rs 1,000 per kl compared to the realisation of a PSU refiner.
They said the subsidy burden would not increase if the private sector were to be given the same benefits as the public sector. “This is because the volume lost by private sector is gained by the PSUs, to support which the government has to provide additional compensatory subsidy.” The objective of deregulation was to usher in competition to improve efficiency and the quality of service to consumers.
“For a start, perhaps, the government could review the economic logic of on one hand providing subsidies to the extent of Rs 21,000 crore for petrol and diesel (2006-07) and on the other, imposing an indirect excise tax on the same two products of nearly Rs 42,000 crore,” they said.
Even as the government is debating on the means of neutralising the impact of galloping global crude prices on oil PSUs, RIL chief Mukesh Ambani, his counterpart in Essar Shashi Ruia and Shell India chairman Vikram Mehta have sought time from Mr Singh to express their “concerns”.
The three bigwigs, who set up petrol pumps to sell petrol and diesel when government opened up the sector, have seen their combined market share fall from 15% in April 2006 to only 1% in September 2006.
“The predatory pricing policy of the PSUs is against competition policy and, given the price sensitivity, it has led to a collapse in the market share of the private companies,” the three wrote in a joint letter dated August 16.
The government, they said, has administratively kept the selling price of petrol and diesel below the cost.
Private retailers sell fuel at close to cost price, making their retail price costlier then the public sector competition.
Indian Oil, Hindustan Petroleum and Bharat Petroleum get compensated for selling fuel below cost through a
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combination of oil bonds and discounts on the supply of indigenous crude by ONGC/OIL. “The private sector companies are receiving no such support,” they said. The government is keeping fuel prices lower than cost despite its own notification that the prices of petrol and diesel would be determined by the market.
“Had the government followed the Rangarajan Committee’s recommendations the domestic selling price of petrol and diesel would on average have been Rs 1,600 per kl and Rs 3,700 per kl higher respectively over the 2006-07,” the trio wrote to the prime minister.
Private refiners, they said, have been forced to export their entire production, which has resulted in a loss of Rs 1,000 per kl compared to the realisation of a PSU refiner.
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“Approximately 2,000 dealers invested about Rs 5,000 crore in the private sector retail network. Their investment is now at risk,” the letter said. “It is our estimate that about 80,000 jobs (direct and indirect) will be lost if the level playing field is not restored.”They said the subsidy burden would not increase if the private sector were to be given the same benefits as the public sector. “This is because the volume lost by private sector is gained by the PSUs, to support which the government has to provide additional compensatory subsidy.” The objective of deregulation was to usher in competition to improve efficiency and the quality of service to consumers.
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The trio said options existed by which on one hand the government can secure product price stability and on the other ensure that competition is not throttled.“For a start, perhaps, the government could review the economic logic of on one hand providing subsidies to the extent of Rs 21,000 crore for petrol and diesel (2006-07) and on the other, imposing an indirect excise tax on the same two products of nearly Rs 42,000 crore,” they said.
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