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Does deregulation really mean a lack of government control?

Source : BUSINESS_STANDARD
Last Updated: Thu, Jan 17, 2013 20:16 hrs
A worker pumps petrol into a customer's car at a fuel station in Sidon, southern Lebanon

Even as the government allowed oil marketing companies (OMCs) to raise diesel prices, its role in controlling prices may not end.

The government continues to control petroleum prices even after petrol prices were deregulated in June 2010. In fact, OMCs made revenue losses worth Rs 2,000 crore on the sale of petrol during the first half of the financial year.

Petrol prices on Thursday were cut by Rs 0.25 a litre, excluding state levies.

In Delhi, petrol decontrol has seen the differential between diesel and petrol rising to around Rs 20, impacting sale of petrol vehicles. This is in stark contrast to June 2010, when petrol was deregulated. At the time, the differential was Rs 11.3. Since then, petrol prices have been revised 27 times leading to an overall 31 per cent jump in rates. Under the new pricing regime, the National Capital Region itself has seen a hike of 31 per cent from Rs 52.43 per litre to Rs 67.24 so far. Prices were increased 19 of the 26 times, rates were revised.

The Kelkar committee report had suggested a gradual phase-out of subsidy on diesel pricing and LPG. The panel had recommended a hike of Rs 4 per litre on diesel, Rs 2 per litre on kerosene and Rs 50 per LPG cylinder. Prices could be hiked every month until revenue losses are covered, it had said. The OMCs' revenue losses on account of selling subsidised petroleum products stand at Rs 160,000 crore.

Oil companies have been looking for a revision even in petrol prices since November due to the rupee-dollar imbalance. However, the hike did not take place owing to political pressure and Assembly elections in various states.


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