Ensure greater market play in oil pricing: CII

By Staff
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Google Oneindia News

New Delhi, Dec 3: With falling crude oil prices in the international market, time is ripe for the country to move towards a market-determined oil price mechanism, industry chamber CII said today.

''As long as international crude oil prices are within a specific band, the market forces should determine the prices of petroleum products in the domestic market,'' CII President R Seshasayee said.

Any movement of international prices beyond the price-band must have an automatic response on the price front, which is known in advance, he added.

Last week, the international prices of crude oil hovered around 60 dollars per barrel, down from recent peak of 75 dollars a barrel.

''The other damage being done to the fundamemtals of the economy is the fact that owing to the recourse that the government takes to the debt market for finacing oil deficit merely passes the liability on to our future generation, which is economically and ethically not correct. We cannot afford to grow today at tomorrow's expense,'' the CII President said.

The government has just released the second tranche of oil bonds totalling Rs 5,000 crore to Indian Oil, Bharat Petroleum and Hindustan Petroleum. the first release, for an identical sum, was made in October.

While the current bouyancy in the economy makes financing through receivables possible, it is quite possible that the economy may not be this robust always and then the lack of liquidity in the system may prove to be major bottleneck, Mr Seshasayee added.

Important thing for India is to look at ways to reduce its dependency on oil imports, he said.

Seventy per cent of India's oil consumption is imported.

Mr Seshasayee said that as the reduction in prices might help in containing headline inflation in short-term, it should not detract from the objective of letting market forces have a greater role in the pricing of oil.

Highlighting the need for rationalisation of subsidies on LPG and kerosene, he said the government should follow the Rangarajan Committee report and adopt the formula for changing over to trade-parity prices.

The government should make all oil products VATable and switch over to goods and service tax (GST) by 2010, Mr Seshasayee demanded.

UNI

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