Dismantling of APM on schedule
Oil Pool Account to go from 1 Apr 2002
Union Finance Minister Yashwant Sinha told Parliament today that as decided by the Centre in November 1997, the government has decided to dismantle the Administered Price Mechanism (APM) in the petroleum sector from 1 April 2002.
As a result, the following measures are being taken:
1.The pricing of petroleum products will become market determined.
2.The Oil Pool Account will be dismantled on 1 April 2002 and the outstanding balances will be liquidated by issue of oil bonds to the concerned oil companies.
3. Private companies will be permitted in distribution subject to specified guidelines.
4. A Petroleum Regulatory Board will be set up to oversee the sector.
5. Subsidies to refineries in the North-East will continue on a rationalised basis.
6. Freight subsidies will continue to be provided for LPG and kerosene to far-flung areas.
7.As a result of the dismantling of APM, the price of diesel will come down by around 50 paise per litre and of petrol by around Re 1 per litre. These changes in prices will come into effect from 1March 2002, initially as part of the Oil Pool Account.
8. The 1997 government decision on the dismantling of APM mandated the subsidy on LPG and kerosene oil to be reduced to 15 and 33%t respectively by 1 April 2002. Accordingly, the price of LPG is being raised by about Rs 40 per cylinder and of kerosene oil for PDS by about Rs 1.50 per litre from 1 March 2002. These subsidies will be borne by the consolidated fund from 1 April 2002.
9. The subsidies on LPG and kerosene will be on a specified flat rate basis from 1 April 2002. The retail prices will then vary as the price of crude oil changes in international markets.
10. These subsidies will be phased out in the next 3 to 5 years.
11. Since the subsidy burden will be borne by the Union budget from next year, the taxation measures have been designed to raise the required resources.
Sinha said he believe that this package of measures for dismantling of APM meets the requirements of consumers and producers. It will also create a more competitive environment in this vital sector.
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