Business Standard

Finance ministry wants oil marketing norms eased

Remove Rs 2,000 cr investment criterion, says ministry

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Jyoti Mukul New Delhi
The finance ministry wants entry barriers on the marketing of oil products to be removed through changes in the draft petroleum and gas regulatory board Bill that was placed before the Cabinet last week.
 
The Bill, which was slated to be introduced in the winter session of Parliament after the Cabinet's approval, has been deferred.
 
Officials told Business Standard the finance ministry had also suggested that liquefied natural gas (LNG) terminals be excluded from the common-carrier principle. The ministry also wants checks to disallow the same company from owning an LNG terminal as well as the pipeline to transport the regassified LNG.
 
The petroleum ministry grants marketing licence to companies that have invested Rs 2,000 crore in the sector. The licence will be issued by the regulator once it is in place.
 
The Bill empowers the regulatory board to authorise entities to market notified petroleum products and gas. The finance ministry, according to sources, wants to open up the marketing of oil products by removing the minimum investment criterion.
 
The draft prepared by the petroleum ministry does not lay down any eligibility criteria but leaves it to the regulator to spell it out.
 
"The finance ministry wants the Bill to clearly spell out the opening up of the marketing of oil products without any restriction. The regulator's role in this aspect should be non-discretionary and non-discriminatory," said an official.
 
Besides the companies that are already into marketing, the government has granted marketing rights for transport fuels to Reliance Petroleum, Essar Oil, Oil and Natural Gas Corporation, Numaligarh Refinery and Shell India since they meet the investment criteria.
 
The finance ministry wants the regulator to essentially be a body for pricing and quality management.
 
"The regulator should be empowered to cancel marketing licences and take penal action. But to keep entry restrictions even after the dismantling of the administered price mechanism will not be proper," he said.
 
On the issue of common carrier, the finance ministry sees the danger of transfer pricing in the event of a company owning an LNG terminal and as well as the pipeline. The official said the company could slash the pipeline transportation cost and put the burden on the price of regassification at the terminal.

Opening up

    PRESENT NORM The petroleum ministry grants marketing licence to companies that have invested over Rs 2,000 crore in the sector
 
FINANCE MINISTRY WANTS To open up the marketing of oil products by removing the investment criterion
 
WHAT THE BILL SAYS It empowers the regulatory board to authorise entities to market notified petroleum products and gas
 
OTHER SUGGESTIONS
 
  • Liquefied natural gas (LNG) terminals be excluded from the common-carrier principle
  • Measures to disallow the same company from owning an LNG terminal as well as the pipeline to transport the regassified LNG
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    First Published: Dec 02 2004 | 12:00 AM IST

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