On the wake of abnormal rise in Petrol, Diesel prices, the Government of India considered the option of subsidisation through upstream state-owned companies like ONGC and Oil India. This step was one which could severely affect private oil companies.
According to an Economic Times report, private oil companies had suggested cutting duties on petrol and diesel rather than reversing deregulation(price control). The deregulation decision taken by the Modi government had allowed the oil companies to regularly revise the price which led to massive fuel price hike.
See also:Central Govt likely to cut excise duty on fuel prices
CEO of Essar Oil, B Anand called the government move to subsidise fuel as “unfortunate”, on his chat with The Economic Times correspondent. He classified the subsidisation move as the ‘reversal’ of the process that started with deregulation of petrol. He said that the oil companies were however hopeful that the government would not take such steps and instead focus on reducing taxes embedded into the fuel price.
The biggest shareholder of Essar Oil is the Russian giant Rosneft and the Essar runs a 20-mt refinery in Gujarat and has a network of 4500 petrol pumps across the country.
ET report says that the private companies have communicated their views to the government on how fuel price control can be detrimental to the sector.
It was after the deregulation of prices that the private oil companies increased their investment in the fuel retailing sector in India. The sector had also got foreign investment.
In one of the biggest foreign investments in the country, Essar Oil was purchased by Rosneft and a consortium of Trafigura and United Capital Partners last year for $13 billion. Other foreign players like BP and Saudi Aramco also have been planning to invest in the fuel retailing business in India.
About the 10% of pumps are controlled by the private players and they contribute 8-9% of the total volume of fuel sold in the country and are expanding fast.
An analyst who didn’t want to be named said ET that the private players had burnt their fingers in the first phase of the deregulation in the last decade and that they had been circumspect and had expanded slowly. He further told that they had feared price controls might return if crude oil prices went up and that their fears seemed to come true now.
A Shell spokesperson in an email informed ET that the deregulation of fuel prices had brought in more transparency within the system and that it had also positively impacted the daily operations of countries. He further added in the mail that including fuel and natural gas under the purview of goods and services tax would help in dealing with volatile prices.
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