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Oil sector reforms to take a beating

Pradeep Puri in New Delhi

The petrol pump allotment issue has dealt a severe blow to the ongoing oil sector reforms.

It has pushed back the marketing plans of public sector oil companies that were bracing themselves for competition from the private sector in the retailing of auto fuel.

The proposal to set up a downstream regulatory body, a step expected to boost the oil sector reform process, is still awaiting parliamentary approval. Though the Bill for the purpose was introduced in the last session of Parliament, it has not been taken up for consideration so far.

All hopes of any legislative work in the rest of the ongoing Parliament session have been put to rest because of the repeated adjournments over the petrol pump allotment issue.

In the absence of a regulatory body, the government will continue to keep its grip on the oil sector. The pricing of various petroleum products, dealers' commissions, fuel transportation charges and various other issues will continue to be influenced by the government, till a regulatory body is set up.

The controversy over the allocation of petrol pumps has also put the divestment exercise in public sector oil companies on the back burner. The divestment ministry has been pushing for the sale of the government equity in three public sector oil companies - Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited and Indian Oil Corporation.

It has also been resisting all attempts by these companies to come out with initial public offerings before their divestment. But, the recent imbroglio is bound to slow down the process considerably.

Oil PSUs will have to confront with another problem in case all the allocations made by the dealer selection boards are ultimately cancelled. The management of petrol pumps and other agencies may run into problems till such time as new dealers are selected and trained for the purpose.

This will give a leeway to the private sector that has been eagerly waiting to enter the auto fuel retailing business. The private sector companies can easily woo the dealers running the B-site dealer-owned-dealer-operated outlets, whose allotments have been cancelled by the government.

However, wooing the dealers running the A-site company-owned-dealer-operated petrol pumps may prove to be difficult. Most of these petrol pumps are in metropolitan cities and are considered prized-ones because their volumes are high. Since these are owned by the oil companies, the private sector companies may not be able to acquire them.

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