Poor Ram Naik and Mani Shankar Aiyar! They got all the blame for messing up with oil prices and halting the reforms that had been initiated with the proposed dismantling of the administered pricing mechanism (APM) for oil products from April 2002.
First, it was Ram Naik. The Vajpayee government had decided that petroleum product prices would be fixed by the oil companies, not the Union cabinet, in keeping with the trends in the international market. A time-table for implementing the dismantling of the APM for oil products had also been prepared.
Ram Naik, petroleum minister at that time, decided to implement that decision, but with some reservations. He allowed the oil companies to fix the prices of petrol and diesel (leaving out liquefied petroleum gas) every month, but only after consultations with the petroleum ministry. The Union cabinet gave up its power to decide and approve petroleum product prices. The oil companies got some freedom. But the petroleum ministry under Ram Naik expropriated from the Union cabinet the power to give its green signal to any price change decision the oil companies wanted to enforce.
Not surprisingly, there were no changes in petroleum product prices for almost about a year before the Vajpayee government went in for the general elections in 2004. Even if the oil companies had mooted a price increase or adjustment during that period, the petroleum ministry would have shut them up. Consequently, no price change was effected. That was a big blow to reforms in the petroleum sector.
Mani Shankar Aiyar, as petroleum minister under the Manmohan Singh government, pushed petroleum product pricing to the same direction and in fact expedited the process of reversing the reforms initiated in this sector. Instead of repairing the damage already done, Aiyar restored to the Union cabinet its power to decide and approve prices of petroleum products
