The high-level Naresh Narad committee has suggested that subsidies on kerosene and LPG be extended to private companies also, in addition to the PSU oil marketing companies, post deregulation of the petroleum sector.
The government, in accordance with its roadmap for deregulation of the oil sector, is expected to bring down the subsidies on kerosene and LPG to 33.33 per cent and 15 per cent respectively, by the end of March 2002.
The committee's recommendation, which comes at a time when private and multinational companies have frozen further investment plans in the country due to "lack of a level playing field", is aimed at facilitating the creation of infrastructure in bottling, tankages and distribution of LPG.
The committee hopes that extending the subsidies to private players will encourage competition in the sector, currently dominated by state-owned oil behemoths.
Currently, private players have only a marginal presence in the subsidised domestic LPG market, which is the largest segment for LPG. On the other hand, as a substantial amount of kerosene sales happen through the public distribution system at highly subsidised prices, private players have a negligible presence.
Senior officials at a private LPG company said: "The committee report, if accepted, will create the level playing field that is essential for private companies to make further investments in the country."
The Naresh Narad committee has recommended that the government put in place a mechanism for administering the subsidies before private players are allowed to market these products.
All the members of the Indian Liquefied Petroleum Gas Industry Association (ILPGIA), an organisation consisting of the six largest private LPG companies, have already stopped investments into the country, as the government has failed to stick to its programme for phased withdrawal of subsidy on LPG.
