The Telegraph
Since 1st March, 1999
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Oil majors gain as users suffer

New Delhi, April 19: With the dismantling of the administered price mechanism (APM) and the linking of domestic prices of petroleum products to international prices, the national oil majors have seen a quantum leap in their profits but the consumer has largely been at the receiving end.

The Re 1 per litre cut in the price of diesel has had no impact on the mood of striking truckers as the price of the transport fuel has already been raised by Rs 4.06 per litre since January this year.

The recent price cut in diesel and petrol, ironically coinciding with the Iraq war, reverses the trend of steadily increasing prices of these two transport fuels since January this year.

The price of petrol and diesel had been increased five times this year with petrol going up by over Rs 4.56 per litre.

Official statistics reveal that on April 1, 2002, when the APM was dismantled, the price of petrol was Rs 26.54 per litre and that of diesel Rs 16.59 per litre. The prices of these two fuels started rising steadily and were around Rs 7 per litre higher for petrol and close to Rs 6 per litre more for diesel by mid-March this year.

Apart from the price reduction this week there were only three earlier occasions , since April 1, 2002, when the prices of these fuels were lowered. Once by as little as 18 paise per litre which was followed by a 70 paise per litre reduction in November and December last year.

The national oil companies, on their part have been claiming that they have not been passing on the entire increase in international prices to consumers and have been bearing part of the burden.

In fact, it is an open secret that the government restrains the oil companies from raising the prices of petro goods too often in order to avoid an adverse political fallout. This is the argument that the truckers are likely to hear each time they take up their demand for a “stable” diesel price regime.

Petroleum minister Ram Naik has stated that prices can be reduced further only if the price of the Indian basket of crude falls to $ 20 to 22 per barrel.

International prices for the Indian crude basket had touched a high of $ 32.56 per barrel during the first fortnight of March. This had fallen to a low of $ 23.53 per on April 7 which in turn led to the Re 1 per litre price cut.

The international price of UK's high-quality Brent crude is now hovering at $ 25 per barrel as there is enough oil in the Gulf and Iraqi supplies are also expected to resume soon.

The Opec cartel is, in fact, worried that crude prices may come down further and are meeting on April 24 to discuss output cuts to arrest the fall. The cartel is determined to keep the crude prices above $ 25 per barrel.

While the government is aware that diesel is a politically sensitive commodity used both in the transport and farm sectors any major concession to the truckers will amount to a reversal of its economic reforms policy aimed at ushering in market-driven prices. And the fact that the petroleum sector has been thrown open to private companies makes it even more difficult to compromise on the issue.

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