Regulator for targeted petro subsidy

The Petroleum and Natural Gas Regulatory Board (PNGRB) has urged the petroleum ministry to offer targeted subsidy on petrol, diesel, LPG and kerosene and ensure fair competition.

Otherwise, it said, it would "be forced to intervene" under the Petroleum and Natural Gas Regulatory Act.

The regulator, in a letter to Petroleum Minister Murli Deora, also said that the regulatory framework of the board and the policies of the government should complement each other or the regulator may have to intervene in the government policy.

The regulatory board has the mandate to promote a competitive market and if a company complains of unfair trade practises, it can intervene in the government's policy.

However, petroleum, petroleum products and natural gas have not yet been notified by the government under the regulatory Act.

"Till petroleum products are notified by the government, the regulator cannot directly intervene in the policy relating to the products," said a senior government official. A member of the regulatory board said it could take action only if a company complained of unfair trade practices.

The regulator has written to Deora saying continuous subsidisation of petroleum products will lead to "distortion of market forces and prevention of free and competitive markets".

"In the letter, the regulator has asked for direct subsidy to sections of society for which the subsidy scheme is meant. It also says the process of subsidy needs to be transparent in order to avoid conflict with the regulatory board Act and the Competition Act," the government official said.

The chairman of the regulatory board, L Mansingh, could not be contacted.

The regulator has also asked the ministry to notify petroleum, petroleum products and natural gas under the Act which will allow the regulator to regulate the marketing and distribution of these products.

The development comes before a ministerial group, headed by External Affairs Minister Pranab Mukherjee, is to meet on December 14 to consider a hike in the prices of petroleum products.

Petroleum Secretary MS Srinivasan had on Monday said that hiking the prices of fuels was an option before the group of ministers.

Private sector fuel retailers like Reliance Industries and Essar Oil have been forced to shut many of their petrol and diesel retail outlets as they are not given subsidy, the benefits of which are extended to the three government-owned companies.

Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation get oil bonds from the government and discounts from upstream government-owned oil companies to partly compensate them for selling petrol, diesel, LPG and kerosene at subsidised prices.

Reliance and Essar in petrol and diesel retailing and a host of other private companies, including Shell and Elf, involved in LPG retailing, have complained of an unequal playing field in the sector.