Changes In Policy On Oil Tariff Urged

Delivering the third Loveraj Kumar Memorial Lecture on India's oil policy for the next century, here on Sunday, Kelkar said the administered prices regime was non-transparent and certainly not efficiency-compatible.

He said a comprehensive reform of pricing and tariff policy was required as that alone could promote infusion of capital and efficient use of country's resources.

Kelkar said it had been estimated that in the coming decades, capital requirements in the hydrocarbons sector would be of the order of $ 50 billion. Capital, whether domestic or international, requires stable policies, transparent pricing and competitive markets.

He said the urgency of these reforms was even greater now as Asian countries like Korea, Japan and China were undertaking such reforms with a predefined time-frame. It was necessary for India to launch similar reforms programme so that the investment decisions were market driven and consumers could enjoy benefits of reduced costs and prices because of greater competition.

In introducing reforms, the country needed to act fast. The starting point would be where the gain was the maximum in terms of increased investments, increased product availability, improved quality and higher efficiency gains.

This could be achieved by asking producers of either crude oil or petroleum products, to face international competition where free imports were allowed with low tariffs. This would be the first phase.

Market and consumer prices could be liberalised over a more longer period. The more important point is that we will have to announce this policy as that will provide guide posts to investors and enterprises. Such reforms to introduce competition, both at the national and international level, would provide the foundation for a rational long-term oil policy so necessary to meet the challenges of the coming century.