The Hindu Business Line : Oil PSUs put at a disadvantage

WITH the Election Commission's (EC) `Model Code of Conduct' coming into force, private sector oil retailers such as Shell, Reliance and Essar will enjoy an edge over the public sector oil marketing companies such as Bharat Petroleum Corporation Ltd and Indian Oil Corporation over the next two months, the time by which the elections will get over.

The PSU oil marketing companies have to stop their dealer selection process at a time when they are in hot pursuit of strategic sites to set up retail outlets, ahead of competition from the private entities.

Over the last year, the public sector retailers have more than doubled the number of retail outlets set up in the previous year.

The elections have also halted the passage of the regulatory Bill in the petroleum sector. The pipeline policy, and the pipeline tariff structure will also have to wait for the elections to get over and a new Government to settle in.

While some of the hold-ups flow from the EC's pen, there are some that have been taken suo moto by the Government in view of its impact on the ensuing elections.

For example, the Government has deferred a decision to hike the natural gas prices. While the Group of Ministers approved a hike of Rs 350 per million standard cubic metres per day (mscmd), the Cabinet deferred it on two recent occasions. A hike of this nature would have enriched Oil and Natural Gas Corporation by Rs 1,000 crore annually, paid for largely by power and fertiliser consumers.

As a consequence, the power tariff would have risen by 13 paise per unit and fertiliser production by about Rs 452 per tonne.

Although desperate to push through the power tariff policy before the implementation of the EC's conduct rules, the Power Ministry met with resistance in the Cabinet.

The Cabinet ordered consultation with a larger forum, including the States, before it takes up the policy for consideration.

The Power Ministry's attempt to kick-start private sector generation projects through `back-door' guarantees from PSUs will also have to wait for the elections to get over.