The finance ministry has proposed a substantial reduction in the Rs 2,000 crore minimum investment limit for companies wishing to market petroleum products after the administered price mechanism is dismantled from April 2002.
The relaxed entry norms will allow companies other than refineries to enter the lucrative market for selling petroleum products. Under the present rules, a company must commit to invest at least Rs 2000 crore or commit to produce 3 million tonnes of crude per annum if it wishes to market petroleum products. The proposal has been sent to the petroleum ministry.
All refineries in any case have an investment of over Rs 2000 crore and so will automatically qualify for importing, storing and selling all varieties of petroleum products after the APM is dismantled.
Senior officials in finance ministry said the change in the entry norms is necessary for increasing competition in the petroleum sector and help consumers in getting a better deal.
The ministry is also in favour of immediate formation of a regulatory authority to oversee the transition to a free market instead of waiting for April 2002.
The sources also said the issue of whether to allow importers in the sector to go in for hedging to insure themselves against fluctuations in international prices will have to be decided by the Reserve Bank of India.
The finance and petroleum ministers are meeting on October 22 to deliberate on the recommendations of the four committees set up to decide the various aspects of the road map for removing the controls on the oil sector. The committees are expected to submit their reports to the ministries tomorrow.
