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Ram Naik

'A Sustained Campaign Of Misinformation Against Me'

An exclusive interview with Ram Naik, the union minister for Petroleum and Natural Gas on APM dismantling and other key oil industry issues:

Arijit Barman INTERVIEWS | 05 November 2002
'A Sustained Campaign Of Misinformation Against Me'
'A Sustained Campaign Of Misinformation Against Me'
outlookindia.com
-0001-11-30T00:00:00+0553

Arijit Barman: At the recent oil conference in Japan, you raised the issue of how Asian countries situated east of Suez were paying a higher price for crude. Has India been alone in raising this concern?

Ram Naik: Two years ago, I had raised this issue in a oil conference in Riyadh. After that I had discussed this issue with individual OPEC members. This time, prior to my announcement, I held meetings with Japan, Korea, China and they have fully supported my views. All the Asian countries have recognised the issue of the Asian premium where countries East Of Suez pay $1.5-$2 more per barrel for the crude. We will together try and find a solution as it will have a significant impact.

When will you announce the LPG/kerosene subsidy and how much will it be? Especially since it is impacting the economics of Indian oil companies.

Oil companies need not be so worried. Government has announced the policy of APM dismantling and the simultaneous deregulation in the oil sector. But it takes some time to settle all issues. The question of subsidy is receiving our attention and I am discussing the matter with the finance ministry. So one can expect a solution soon.

And what is the status of the duty concessions for the oil companies?

The oil companies are panicking and are unnecessarily dragging this issue to the public forum. They are fully aware that we are discussing this issue and it will be settled soon. These are the most organised and efficient PSUs, they should not crib all the time and seek comparison with other sick government units. I am not for haste. I won't hurry for policy decisions to repent later.

Although the prices of petroleum products are being revised fortnightly, the general impression is that they are still controlled by your ministry. Does the ministry really plan to relinquish control?

Some people are spreading this misinformation. Post April 1, 2002, pricing is left to the oil PSUs who are free to take a call and we have advised them to work independently. But as they are all government companies, we have to ensure that they don't indulge in profiteering. So we are striking a balance. There is freedom amidst some minimal checks.

Why can't individual petrol pumps offer competitive (and different) prices when it comes to base products like petrol and diesel?

Full deregulation will take time. Until a private player enters the market (read retail marketing) pricing will be bunched. Moreover, the hospitality arrangements among the PSUs are age old. In the north for example, there are IOC, BPCL and BPCL pumps, but supply to all them goes from IOC's Mathura refinery. Throughout the country, supply has been interlinked for all the oil PSUs. Today the competition is in the services front. When private players move in, pricing will drive the war.

When will the issues related to pricing of crude supplied by ONGC be finalised? Are we going to revise gas prices also?

These are all interlinked issues. So they are being discussed. After all, it all boils down to one point: to what extent will the prices be linked to import parity and what will be the duty structure. It will not be correct to rush through these sensitive points. Just like petrol and diesel, the pricing of gas is also under our consideration. All these matters will be resolved soon, once and for all.

Is your opposition to HPCL/BPCL selloff a time-sensitive response or are you firmly against reconsidering your stand even at a later date?

A sustained campaign of misinformation is being launched against me. Eighty per cent of the total disinvestment proceeds have come from the oil sector. So how can people say I am against sell-offs? I pity my critics' knowledge of arithmetic. But at the same time we should not forget that prior to nationalisation of the oil companies, MNCs did not co-operate with government during the 1971 war. They artificially created shortages and didn't supply aviation turbine fuel. Moreover, from 1974, the asset base of the oil PSUs has more than doubled. It also needs to be seen whether these successful oil companies should be sold through the strategic sell-off route. Unless somebody has a vested interest, he would appreciate government holding on to these companies that give 110 per cent dividend.

Given the excess refining capacity in the country and the large retail network of PSUs, isn't the decision against disinvestment virtually shutting doors to foreign competition? Why should they invest in a controlled sector? So aren't we saying indirectly that we don't want FDI in oil?

Foreign companies are always welcome. We have opened exploration, refining and the global companies are showing interest in Indian exploration. Marketing too has been opened and the private players are setting up their outlets. But at the same time, security and strategic importance should not be ignored in the name of FDI.

How do you propose to resolve the issue of crossholdings in ONGC, IOC and GAIL? How would these companies be privatised?

Crossholdings and disinvestment are interlinked. The cabinet committee has postponed the sell-off of two oil PSUs by three months. In both the cases, the depth of the market is essential. If we allow these PSUs to offload their crossholdings in the market and subsequently, we divest 10-15 per cent, will the market be able to absorb both?

Why should we increase our strategic oil reserves when even during the Gulf War, our crude supplies remained intact? Won't stockpiling have tremendous cost implications?

There is change in on the ground. Gulf War of the early 90's or the present Iraq-US tensions or a possible war amongst India and Pakistan are different scenarios altogether. Thus to keep the economy running in these different scenarios, it's desirable that we maintain strategic stocks. Very few people know but even Japan keeps reserves for 6 months even though they do not have border tensions like us. The cost implications are been worked out and certainly there will be a foolproof formula that would benefit both the PSUs and the government.

Industry watchers feel that our oil companies are missing out on a golden opportunity to indulge in risk management instruments. What is the ministry doing about it?

To begin with, it will be incorrect to say that our oil PSUs are completely barred from participating in the futures market. They are government companies and are accountable to Parliament. Hence their functioning and decision making differs from that of a private company. But the oil PSUs are given some autonomy under the Navratna status.

What is the status of the oil regulator?

The draft bill is currently with the standing committee of petroleum and natural gas for review. The regulator will be in place shortly but till then government will continue to regulate the sector as it is doing now.

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