Petro price cut: Mixed reactions from chambers

The cut in oil prices has evoked mixed response from the industry
chambers. Chambers FICCI and CII welcomed the move but said that the
decision would hurt oil companies badly while Assocham said the cuts will
benefit customers and curb inflationary trends.

FICCI said the reduction in retail oil prices would help contain prices of
essentials and bring relief to petrol and diesel consumers. However, the
reduction would hurt oil companies which are already smarting under
pressure from reduced margins.

The chamber said that the government should take a long term view as the
current arrangement of burden sharing between the government, oil
companies and consumers was unsustainable in the long run.

Echoing a similar view, CII, said that the fuel price reduction would be
good for the consumer but oil companies would have problems of contending
with under-recoveries related to diesel.

"Oil companies are already losing 41 paise per litre. This will get
accentuated with this reduction," said V Raguraman, Principal Advisor
(Energy), CII.

CII has recommended that the government should follow Rangarajan Committee
Report. "It should follow the formula for changing over to trade parity
prices and rationalize state taxes. Government should make all oil
products veritable and switch over to GSA by 2010," Raguraman added.

Assocham on the other hand contends the reduction in prices is totally
justified. "A couple of months ago, the government hiked prices of petrol
and diesel in view of hardening of crude oil prices globally, so it is
natural that government has decided to curtail domestic oil prices now
when crude oil prices have softened internationally," Assocham President,
Anil K Agarwal, said.

The industry body has also suggested that the government should empower
its oil marketing companies to independently increase and decrease the
prices of petroleum products as and when the international oil scenario
calls for it.