Unfortunate timing

Petrol pump allotments should be made on an ongoing basis

It has been reported that the state-controlled oil-marketing companies intend to double their retail networks, and will shortly allot petrol pump licences across the country. Apparently, 65,000 new licences are to be handed out by Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation. The requirements for allotment have been relaxed — passing the Class 12 exam is no longer required. The government’s justification for this expansion is straightforward: No new licences have been issued for four years, while the demand for petrol and diesel at the pump has been growing steadily every year. In addition, previously under-connected geographical areas have seen an increasing demand for fuel with the expansion and improvement of the road network and growing prosperity. These under-served areas need to be given access to petrol pumps. The government has also claimed that the distribution of licences will be supervised by an independent agency. The application process has also been made simpler, and can now be filed online, for example.

While many of these changes are positive and the essential logic behind the expansion of the network is sound, nevertheless this announcement has raised justifiable concerns. Traditionally, a petrol pump allotment has been, if not a steady and enviable stream of income, at least much in demand from local elites in various areas. The timing of this announcement, therefore, is suspect. It comes too close to the Lok Sabha elections in early 2019 for peace of mind. The Opposition parties will no doubt raise an alarm over the eventual licences, claiming that they are being used to buy off influential local personalities in return for their support to the ruling Bharatiya Janata Party. Whatever the truth in these allegations, they are likely to stick, with unfortunate implications for public faith in the independence of the oil-marketing companies. The government and the public sector oil companies should have thought through the consequences of their announcement more carefully.

There is no satisfactory reason that the government can provide for having bunched up the allotment of new petrol pumps close to a period in which alliances are forming and re-forming prior to its re-election. There is no specific economic reason for such a lumpy allotment process, for example. Indeed, the demand is likely to be higher if spread out more over time. A more above-board method can and should have been worked out. Instead of bunching the allotments, they should be made on an ongoing basis, according to a clearly defined schedule and with the economic and commercial justifications clearly laid out each time. It is still not too late to alter course. While, of course, the expansion of the petrol pump network is an important administrative priority, moving the process forward can easily wait till the elections are over, with the results scheduled for May 2019. From both a political and an economic perspective, it is best to avoid giving the impression that petrol pump allotments are being used for political gain.