The Hindu Business Line : Plan panel moots independent oil regulator

The Planning Commission has recommended an independent oil regulator for the downstream sector to ensure a level playing field. The Integrated Energy Policy prepared by an expert group constituted by the Commission and headed by Mr Kirit Parikh, Member, has recommended the need for a regulator in the coal sector to ensure price revisions. It has also called for a greater thrust to power sector reforms.

Releasing the Policy, Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, said there was need for a proper pricing mechanism in the energy sector. "If international oil prices keep going up, subsidies will be unsustainable. Consumers by and large do not realise how much they are subsidised. There is a need to create awareness," he said.

The Policy has suggested an independent regulatory body for the downstream sector to ensure competition on level terms in refining, transportation, distribution and retailing of oil and gas. About the Director General of Hydrocarbons (DGH), the upstream regulator, the expert group has said that it needs to be strengthened and made independent.

In order to cushion consumers from the increasing international crude prices, the expert group has suggested adjustment of ad valorem taxes and levies in a revenue neutral manner. However, it has said that if the continuous price change cannot be absorbed by change in taxes and duties, it should be passed on to the consumer.

About the proposed downstream regulator, the group has said, "The regulator must review the current regime that limits competition from both foreign and domestic private players in the downstream sectors."

Transparent subsidies

On providing subsidies to kerosene and LPG, the group has said that the mechanism for subsidised supply of kerosene and LPG needs to be revised so as to make it transparent and directed only to the targeted beneficiaries. "For this purpose, the possibility of introducing coupons or smart/debit cards should be explored," it said. It has also suggested that the subsidies on these products should be charged directly to the Budget and not loaded on to the oil companies. On pricing of petroleum products, the expert group has suggested trade parity pricing mechanism instead of import parity.

The Policy has also stressed on the need for a regulator in the coal sector to ensure price revisions, suggest measures for setting coal prices, regulate trading margins and ensuring that price discovery through e-auctions was free of distortions. "The proposed regulatory body would as an interim measure approve coal price revisions, ensure coal supply to the power sector under commercially-driven long term fuel supply and transport agreements (FSTAs), facilitate developing formula for resetting coal prices...regulate trading margins," the Policy said.

Coal prices

It recommended that export-quality coal should be sold at export-parity prices as determined by import price at the nearest port minus 15 per cent, a practice currently being adopted for supply of good quality coking coal to the steel industry. The group also suggested that 20 per cent of coal produced be sold through e-auctions.

The Policy has also called for introducing greater reforms in the power sector, reducing transmission and distribution losses and encouraging private sector participation.

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