Playing dirty
basics of free market mantra confound our fuel managers. While letting the fuel market go free they fail to balance environment and public health objectives with market forces. Worse, they are not even thinking about it. Delhi is probably the only city in the world today where a clean fuel like compressed natural gas (cng) is priced higher than poor quality diesel. The government is clueless on what to regulate and what to let go. So cng is left at the mercy of the market forces, its supplier is allowed to make profit and government is greedy for higher excise revenue from it. But diesel prices are capped, not letting them align with international prices. So in the so-called free market government intervenes only to promote dirty fuel.
When administered price mechanism (apm) was dismantled it was hoped that petroleum marketing companies will be free to set consumer prices depending on the way market behaves. But then diesel was still the holy cow. So when the dismantling of apm and hike in crude oil prices coincided in April this year, the ministry of petroleum and natural gas directed the oil companies to cap diesel prices, absorb costs, forget free market.
The Petroleum Regulatory Bill, 2002 is on the anvil to consider some independent mechanism of price regulations. But what is being ignored completely is that the future fuel policy will not merely free market for fuels but will also need to promote clean and environmentally friendly fuel and make them competitive in the market. Nowhere in the world have clean fuels come to the market without regulatory support.
There is still no hint of designing taxation and pricing policy to promote clean fuels for environmental reasons. There is an urgent need for post-apm fuel policy to address this issue. But the fiscal pundits are harping about the need for tax adjustment, improving productivity and internal cost reduction by the oil companies so that only the minimum increase in fuel prices is passed on to the consumers to avoid economic shocks in the post apm era. But these principles are not extended to cng. Government cannot escape from framing a composite fuel pricing policy to address environmental concerns. More so now when it is mandated by the Supreme Court to introduce environmentally friendly fuels in other critically polluted cities of India.