With the contentious issue of gas pricing and diesel deregulation behind him, Dharmendra Pradhan, Minister of State (Indepenédent Charge) Ministry for Petroleum & Natural Gas, is now focussed on coming out with a mechanism that will help PSU refiners source crude oil at better rates and enhance their gross refinery margin (GRM).

Clear that oil and gas sector will be dominated by public sector entities, Pradhan, in conversation with BusinessLine just before leaving for Saudi Arabia for bilateral talks, said the Government is only a facilitator. Commercial decisions have to be taken by companies. As with other fuel prices, every six months gas rates will also be decided by the companies based on the formula set out by the Government, he said. Edited Excerpts:

With two critical issues sorted out, are you now turning to the PSU refiners’ crude oil sourcing mechanism?

The spot crude oil sourcing mechanism should be dynamic. When market dynamics are in play, they will have to strategise how to source crude oil cheap and improve their refinery margins. Any business entity has to look into the cost of production and raw materials. These are the two aspects where things can be reworked according to the market dynamics.

Earlier, there was a limitation on processing of crude varieties due to their refinery configurations. But there are new technologies that allow refineries to process different kinds of crude. The PSU refineries should be in a position to process crude from Latin America to Africa. They need to not only diversify their crude basket but also upgrade their refineries to make it possible for them to get a better price realisation.

But experts say some of the PSU refineries have outlived their life…

It is true that the refineries are old, but technology is available. Each refinery will have its own benefits no matter how old it is. When market dynamics are in play, the refiners have to see how they can deliver the product at competitive rates. The GRM of PSUs is low and they need to improve it. The efficiency needs to go up and the way to do that is to bring technology and a smart economically viable procurement model for crude.

Is the Government open to public-private tie-ups for fuel retailing?

The private sector is satisfied with diesel de-regulation and has renewed its interest in retailing. The Government will not interfere if PSU oil marketing companies enter into joint ventures for retailing. They are into joint ventures for refineries, aren’t they?

Are you reworking the subsidy mechanism? (The subsidy burden will be restricted to LPG and kerosene now. ONGC disinvestment will be impacted by the subsidy issue.)

How the delivery mechanism for LPG subsidy will come, we are in discussions with the Department of Expenditure, Ministry of Finance. Direct Benefit Transfer for LPG is a technology to deliver the subsidy. Right now, the subsidy is going to the companies. We plan to give it to the consumer directly. Both diesel decontrol and Direct Benefit Transfer for LPG will help reduce the subsidy burden. If the subsidy burden overall comes down, then ONGC will also benefit. Once the burden comes down, then the sharing arrangement can also be reworked.

When is the tenth edition of oil and gas exploration licensing rounds to be announced?

Going by the experience of the previous nine rounds, we want to come out with a better system now. We have realised that availability of strong seismic data, a clarity on fiscal regime — whether revenue share or production sharing besides some administrative issues need to be resolved before we launch NELP-X. This is no breaking news so I can’t give a timeline.

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