Government all set to deregulate petro marketing - Views on News from Equitymaster

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Government all set to deregulate petro marketing

Mar 29, 2000

The government is considering a move to grant private and joint sector refineries marketing rights ahead of the March 31, 2002 deadline. The decision to permit marketing of petroleum products by private and joint sector refineries is a step in the right direction. Currently, this sector is controlled by government controlled companies, the largest of which are Indian Oil corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.

Large refiners like Reliance Petroleum and Mangalore Refineries have had to enter into agreements with public sector marketing companies to lift their output. They are thus dependent on the PSUs. Moreover, they are unable to participate in this area that commands lucrative margins. Such a decision would definitely spur the likes of Reliance Petroleum to set up their independent marketing network in the country.

Setting up of a marketing network would involve large amounts of funding apart from the fact that such an activity would be time consuming. From this point of view, it is likely that the government's proposed decision is implicitly aimed at diluting its holdings in public sector oil companies in favour of private parties.

However, there are procedural hurdles to achieving deregulation of the marketing sector. The government continues to control the prices of a number of petroleum products and this could make the setting up of such networks unviable.

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