The government will consider deregulating petrol and diesel prices, as also increasing rates of natural gas sold by state firms, said Murli Deora, who is likely to start a second term as petroleum minister.
Separate draft Cabinet notes are ready for giving public sector Indian Oil, Bharat Petroleum and Hindustan Petroleum freedom to fix petrol and diesel prices when crude oil prices are below $75 a barrel and raising rates of natural gas produced by Oil and Natural Gas Corp (ONGC) and Oil India Ltd from nominated fields.
Deora, the outgoing petroleum minister, has been renominated to the Union Cabinet and is mostly likely to retain his ministry, breaking the jinx that no one oil minister has served a second term in the country.
No one has ever completed a full five year term as petroleum minister and none have ever been repeated. BJP’s Ram Naik is the longest serving oil minister, surviving at Shastri Bhavan for a good four-and-half years from end-1999.
“First, my portfolio has not been decided. Prime minister has not told me anything,” Deora said before leaving for taking the oath.
He, however, said issues of deregulation of petrol and diesel prices would very much be on agenda for the new government.
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“We insulated the consumers when international crude oil prices touched $147 per barrel last year. Our attempt has been to make available fuel to common man at affordable price,” Deora said.
The fall in crude oil prices has, however, presented an opportunity to free the auto fuel prices that were brought under government control in 2004 after being free for almost two years.
“My personal opinion is that it is the right time to free petrol and diesel prices. But poor should continue to get cooking fuel like kerosene at subsidised rates,” he said. “Nowhere in the world is kerosene sold at Rs 9 per litre... It is cheaper than even mineral water.”
Deora, 72, has been instrumental in bringing about some structural reforms driving state firms to their core competence rather than diversifying businesses. He earned the wrath of reformists when he stonewalled attempts to allow skyrocketing oil prices to be passed on to consumers.
The ‘Draft Cabinet note on Decontrol of Price of Sensitive Products’ suggests a move to market-determined pricing when crude oil prices are below $75 a barrel. At these levels, state-run oil retailing firms would compete to fix consumer price.
In the event crude oil crosses the $75 a barrel mark, the government would intervene in the market to lessen the burden on the common man through a sharing of the revenue losses of retailers between the national treasury and upstream oil and gas companies.
Currently, the government controls on the prices of automobile and cooking fuels force state-run refiners to sell oil products below cost and the losses are partly borne by exploration companies.
Also on agenda will be increasing price of gas that ONGC produces from fields given to it on nomination basis. ONGC currently gets about $2 per million British thermal unit while gas from fields operated by BG is sold at $5.70 per mmBtu.
Also, explorers may get a seven-year tax break on income from gas produced at new fields to help boost investment.
India had last month postponed its largest auction of exploration blocks on concerns that the lack of such a tax break would discourage domestic and overseas companies from bidding.