Petro politics

When it comes to oil politics, why is India not as smart as the rest? The answer is — lack of long-term strategy to manage oil economics.

As one of the biggest consumers of oil, India needs to learn from one of the largest producers, Saudi Arabia, and have a long-term plan to ensure that its interest are protected irrespective of the market situation.

The price at which refiners have bought their crude dropped to $60.26 a barrel on December 5 from $73.09 a barrel on November 1. The companies take the 15-day average for deciding the retail prices. The PSU oil marketing companies have been claiming that they are passing on the benefits of the softening global petrol and diesel prices to the domestic retail market. Between October 17 and December 7, the price reduction of petrol at Delhi has been ₹11.91 per litre and diesel has been reduced by ₹10.14 per litre. Similar reduction in prices has also been effected in other markets all over India.

But, local retail prices are still high. The current price at which refiners sell to retailers is about ₹34-35 a litre for petrol, but to the consumer it is being sold close to ₹70 a litre or more, and diesel which costs a retailer around ₹39-40 a litre to consumer is sold at near ₹65.55 a litre or more.

This is because of high taxes and local levies. The Centre did make a token gesture by bringing down the excise duty by ₹1.50 a litre in October. But, it really didn’t help the consumers much. What is desperately needed is a clear thinking on pricing on the entire petroleum value chain.

There has been no dearth of committees that have suggested various mechanisms to solve this problem. But despite their useful suggestions, what these reports lacked was a long-term integrated plan for the entire energy sector — upstream-downstream-midstream.

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