The recent news about petroleum ministry mulling removal of control over pricing of four key fuel products brought cheer among market players and the PSU oil companies shares rose in unison. logically yes, the move was to allow these companies to adjust the product prices in tandem with the crude price movement to avoid under recovery on ther sale of key fuels. The deregulation was to be effcetive only till the crude price was below $ 75 a barrel.
The crude has already touched a level of $ 72 per barrel and hence the proposed decontrolling may not see the light of the day atleast in the near future. but from a policy point of view, the proposed measure doesn't seem to be in the interest of the PSU oil marketing companies as is being claimed by the ministry. a free market regime would encourage private players like RIL, Essar and Shell to revive their marketing operations. The PSU OMCs would no longer have the protection of oil bonds compensating them for the losses incurred from government controlled prices. A price war would entail and naturally, companies with higher GRMs would benefit. No prize for guessing who's going to extract maximum out of a decontrolled fuel regime.
The crude has already touched a level of $ 72 per barrel and hence the proposed decontrolling may not see the light of the day atleast in the near future. but from a policy point of view, the proposed measure doesn't seem to be in the interest of the PSU oil marketing companies as is being claimed by the ministry. a free market regime would encourage private players like RIL, Essar and Shell to revive their marketing operations. The PSU OMCs would no longer have the protection of oil bonds compensating them for the losses incurred from government controlled prices. A price war would entail and naturally, companies with higher GRMs would benefit. No prize for guessing who's going to extract maximum out of a decontrolled fuel regime.
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