APM to be dismantled in April
The decks appear to have been cleared for dismantling the administered pricing mechanism in petro-products on April 1.
After 11 rounds of meeting between finance and petroleum ministries, during which the petroleum ministry raised a number of difficulties about dismantling APM, the issue is said to have been clinched over an across-the-table talk between finance minister Yashwant Sinha and petroleum minister Ram Naik.
At this meeting, Sinha - armed with the full backing of the Prime Minister - stuck to his guns and, one by one, reasoned it out with Naik as to why APM had to be dismantled.
He pointed out that this one step was a major economic reform that would virtually revolutionalise the oil sector and create spin-offs down the line.
The finance minister has addressed the specific aspects of the decision about which the petroleum ministry was diffident.
First was the question of subsidy on LPG and cooking gas.
Sinha told Naik that it wasn't possible for him to enter into an arrangement that allows the petroleum ministry to transfer the burden of subsidy on to the finance ministry.
Naik responded by saying that the charge on this has to come from the government - that's been the established position.
Sinha assured Naik that a satisfactory solution would be found. What this solution might be is not known but it could be either higher tax on petrol and diesel or a higher tax on ONGC's windfall profits post-APM (currently, ONGC can charge only 80 per cent of the market price of crude, but post-APM it will get the market rates).
With the additional collections either from the ONGC or petrol/diesel, Sinha might be able to neutralise the burden of subsidy.
Naik also asked for freight equalisation of petro-products so that these are available at the same price all over the country. To this, Sinha pointed out that freight equalisation did not work either for coal or steel.
So, it was unlikely to work for petro-products.
Back to Feb News Archive