Jaipal Reddy to follow Murli Deora, won’t intervene in oil price hike

The sudden change at the top of the petroleum ministry is unlikely to change the direction of the government policies, as the new incumbent minister, Jaipal Reddy, has indicated that he will pursue the policies initiated by the former petroleum minister, Murli Deora.

While Deora was facing public and the opposition’s ire for seven hikes in petrol prices in the last 7 months, Reddy hinted that nothing is going to change in his regime.

Replying to a question whether his ministry would intervene if the oil marketing companies (OMCs) go for another hike in petrol prices, Reddy replied “I am not a new minister of a new government. I am a new minister of the same government...whatever decisions were taken by Murli Deora...were taken together by the cabinet.”

The OMCs have been given the freedom to decide petrol prices according to the prices in international markets, after which there has been a hike of `7 in the last seven months. The last two hikes happened within a span of one month, which brought the UPA government under pressure, as the government is already facing a high level of inflation.

Reddy emphasised the fact that once the prices have been deregulated, it may not be possible for the government to
intervene.

“Consumers should understand that there are limitations under which all of us are working. It is (rise in fuel prices) a global issue,” added Reddy.

The government does not want to increase the prices of diesel since it will have an inflammable impact on the food inflation; it has allowed the OMCs to keep their under-recoveries under control by selling petrol on close to market prices.

At the current price of crude oil (around $90 per barrel), the OMCs are losing over Rs1.20 per litre on the sale of petrol and around Rs7.5 per litre on the sale of diesel.

The gross under-realisation for 2010-11 is projected to be as high as Rs40,600 crore for Indian Oil Corporation and Rs73,600 crore for all the PSU OMCs together.

Global oil futures were lifted due to reports showing improvements in the US business sector. Industrial output showed larger-than-expected 0.8% expansion last month, according to the Federal Reserve.

An improving US economy is seen stoking higher oil and fuel demand. Many analysts anticipate crude prices to hit $100 a barrel this year, largely on the back of a recovery in the developed world after strong demand from China and developing countries propped up oil prices in 2010.

Reddy also said the he will meet the finance minister Pranab Mukherjee to request for a cut in the excise and customs duty of crude oil and petroleum products.

“Our ministry is in favour of taking a close look on the proposal to reduce excise and customs duty on petrol,” Reddy added.
He also said the ministry will expedite the process of approval to Vedanta Resources’ proposal to acquire Cairn India and will play fair. “Issues related to Cairn-Vedanta deal have legal implications. But I can tell you, we will not lose time and it will be a fair play,” Reddy said.