The Hindu Business Line : Shift to transparent oil pricing system, says Chavan

The Prime Minister's Office today called for a shift to a transparent oil pricing system where the regulator fixes cross-subsidies on petroleum products and also questioned the rationale of providing subsidy on cooking gas to affluent sections of society.

Addressing a session on the `Challenge in retail' at the Petrotech-2007 here on Wednesday, the Minister of State in the PMO, Mr Prithiviraj Chavan, said that pricing of petroleum products should not be a political decision and a regulator should step in to decide on the price of petroleum products, and fix cross-subsidies in a transparent manner.

Fixed subsidy

Giving an example, the Minister questioned why affluent sections of the society should be provided liquefied petroleum gas (LPG) on a subsidised basis. He suggested a fixed subsidy on LPG cylinder with the pricing linked with international price parity. This, in effect, would be dual pricing for domestic LPG, according to industry pundits.

"There is a case for better targeting of LPG subsidy. As LPG retail business is more organised than kerosene, it is possible to opt for targeted subsidy in domestic LPG. The present subsidy of Rs 150 per cylinder should not be availed by the affluent class," he said. The price of LPG was maintained at the 2004 level.

Stating that the decision to revise petroleum product prices should not become a politically sensitive issue, he said the price differential between kerosene and the subsidised price at which it is provided to consumers result in its diversion to adulteration in diesel.

Mr Chavan added that keeping in mind the high priority accorded to energy conservation and efficiency, merger of the Petroleum Conservation and Research Association and Bureau of Energy Efficiency should be considered. An autonomous body under the Energy Conservation Act should be set up, he added. This has also been proposed in the Integrated Energy Policy.

Mr Chavan also urged oil retailing companies to utilise space allotted for petrol pumps for other retail activities.

The Petroleum Secretary, Mr M.S. Srinivasan, said that there was a need to effectively target subsidies to check adulteration in fuels by cheaper products. Oil companies should maintain cost-effectiveness.

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