India: Time To Privatize Oil Procurement

Move over subsidies. It is time to privatize oil procurement. Doubters must realize that the telecom industry that was privatized a decade ago did not cause a steep price hike or hold the nation to ransom due to profiteering. On the contrary it has modernized communication, made telephony easier and cheaper for the common man and earned huge revenues for the national exchequer despite PSU’s like MTNL and BSNL not raking in the moolah.

Perhaps the time is ripe to free the oil trade from the shackles of public sector dominance and subsidized distribution, for lowering and rationalizing oil prices. Neither the consumer nor the Government is benefiting from the present system. The price of retail oil in the US moved between $3.6 to $4 per gallon last quarter, much lower than the price of petrol and marginally above diesel prices in India. Swiss based physical oil traders Trafigura, Vitol and Glencore made explosive profits from high oil prices as did Exxon, Chevron and Shell, whose earnings from trading operations were higher than those from drilling .
However Indian oil marketing companies IOC, HPCL and BPCL claim they made little profit on petrol and heavy losses in selling Government subsidized diesel. Indian Oil Co. alone reported a net loss of Rs 3.18 billion this quarter due to financing the subsidies that increased their borrowing cost. Why do the Indian Government and the public sector oil marketing companies, complain of bearing the burden of subsidies when they should be laughing their way to the bank like global oil traders, especially as the Indian consumer pays more than his American counterpart.

http://blogs.economictimes.indiatimes.com/Whathappensif/entry/time-to-privatize-oil-procurement

indiatimes.com