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Energy: Wanted independent regulator - Views on News from Equitymaster
 
 
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  • Feb 18, 2003

    Energy: Wanted independent regulator

    The oil sector deregulation will complete one year since it was succesfully kicked off in April 2002. While the govenment should be commended in adhering to the schedule for deregulation, the promise to appoint an independent regulator is still in limbo.

    In a competitive scenario where players (both goverment and private) are slugging it out for marketshare, there have been several contentious issues that need immediate attention which are legacy to the erstwhile APM regime. For example, granting of licenses to private players for setting up marketing infrastructure is one such area that is still in the purview of the government. Ideally it should be under the purview of the independent regulator, since it is expected to provide a level playing field for all players and ensure fairplay.

    In such a scenario, the government has put itself in a position where it continues to be a regulator and owns major oil refining and marketing companies such as Indian Oil, BPCL and ONGC, thus raising doubts about conflict of interest making deregulation only partially true. In one such instance, there were allegations and counter allegations between one private player and a government oil major over granting marketing licences to the former. Such scenarios can be settled amicably if the regulator is in place.

    The role of an independent regulator would not only encompass troubleshooting contentious issues (such as those mentioned above) amongst players, but also ensure fair product prices and consumer protection from volatile crude prices. An independent regulator could also desist companies from profiteering and create a level playing field for existing players and potential entrants. The government's promise to appoint an independent "Petroleum Regulatory Board" shortly after April 2002 has not yet materialised for several reasons.

    Thus though the benefits of an independent regulator are quite apparent, delay in appointing one so far has not only harmed the overall growth of the industry (by restricting healthy competition), but also worked against the public's well being. And as we move towards completion of one year post the APM regime, the only noticeable difference for the common man has been higher petrol and diesel bills, while the oil majors have laughed their way to the bank.

     

     

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