Government sees new round of proposals for oil pricing

The administered pricing mechanism (APM) for petroleum products was dismantled by the Indian government to move to a market-driven pricing system. The government, however, continued to control prices of certain petroleum products to insulate domestic consumers from global oil price rises. This resulted in increasing under-recoveries by oil marketing companies (OMC) and a greater fiscal burden on the government.

To sort this out, the government appointed an expert committee headed by Dr Kirit Parikh, an eminent economist, to make recommendations on a viable and sustainable fuel pricing system. The committee presented its report on 2 February.

Deregulation proposals

The committee suggested complete deregulation of petrol and diesel prices, stating that these prices should be market-determined, both at the refinery gate and at the retail level. To ensure sustainability of a market-determined pricing system for petrol and diesel it recommended that: (a) there should be a level playing field and promotion of competition among players (both public and private); (b) in order to ensure effective competition, adequate regulatory oversight is required.

Akshay Jaitly is a partner, Rachika Sahay is a senior associate and Varun Nair is an associate at Trilegal in Delhi. Trilegal is a full service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad. The firm has over 120 lawyers, some of whom have experience with law firms in the US, the UK and Japan.