Showing flamboyance or using rhetoric is a common method in the verbal armoury of most
politicians . They go by their gimmicks and seldom help solve national problems rationally. One
such politician is probably former Petroleum and Natural Gas Minister Murli Deora who while
holding a Bisleri bottle in his hand proudly said at a Press conference three years ago that “We
(the Government) are selling kerosene even cheaper than this mineral water”. He did not explain
whose money the Government was draining down the drain. Ravi Srivastava brings to you an
exclusive report.The genesis of fuel pricing shows that some time in the late eighties when fuel consumption in India was about 55 million tonnes, the ONGC and the Oil India Limited were producing roughly half of the country’s requirement. Shockingly even after 25 years and sinking a few lakh crores of rupees crude oil production by the ONGC has not exceeded even by one Mt and remains stagnant at 27 Mt, resulting in the nation’s 50 percent dependence on imported crude. Seventy eight percent of crude, according to analysts, required in India is imported today eating into the precious foreign exchange component. The nation faces a “crude shock” every passing fortnight because of the inefficiency on the part of the ONGC and the policy bankruptcy of top Shastri Bhawan officers. The ONGC is projected as a cash rich behemoth and a Maharatna courtesy compensation to the company on rising dollars.
THREE SERIOUS AILMENTS
The OMCs are plagued by three serious ailments. These are inefficiency, corruption and bad debts/ wasteful expenditures. The OMCs practically everyday make a hue and cry for underrecoveries. The fact is that they are grossly inefficient, taking the example of their project management/capital expenditure. The HPCL planned a green field refinery at Bhatinda. After laying the foundation stone three times--twice by the NDA Government and once by the UPA-I Government--the work finally commenced in 2008. Even after missing two deadlines and 13 years the refinery is still not on stream. In fact, the HPCL now has no money to spare for the crude. The project cost escalated four times since the original detailed feasibility report. The IOC has been trying to raise a coastal refinery at Paradeep for the last seven years with its completion nowhere in sight.
Refinery margins are another grey area with the oil companies. For example, the HPCL had a GRM (gross refining margin) of barely 30 cents in the last quarter from its recently upgraded Vizag Refinery with thousands of crores of capex. The OMCs boast of a high turnover which is courtesy the increased fuel prices. Volume sales barely registered a growth of average 3.5% year-on-year in the last two Five Year Plans. The worst part is that despite underrecoveries in all four petro products which are consumed by the masses and the OMCs having complete monopoly, they resort to competition with each other and undercutting which is totally unfair, unethical and undesirable, since they are compensated by taxpayers’ money/national exchequer.
Observers say the Government cunningly deregulated the price of petrol in July 2010 and gave a free hand to the OMCs to raise it on one pretext or the other, like crude prices going up in international market, the rupee weakening vis-a-vis the US dollar or compensating for a loss on the sale of kerosene, which are contrary to the facts. In June 2008 when crude oil hit the highest price of 147USD per barrel petrol was selling Rs. 51 a litre in India and now when crude is 110 USD per barrel petrol is being sold Rs. 75 a litre. The OMCs misused this leverage continuously for 13 times and finally succumbed to public/political outcry in the first week of November 2011 for a first downward correction of Rs. 2.25 per litre.
CORRUPTION IN OIL PSUs
Corruption is allegedly rampant in the oil PSUs. Insiders say the money is channelled from the sales officer onward to the top for buying lucrative official positions like those of Regional Manager and General Manager (Zones) which are auctioned. There are quite a few avenues for the generation of money viz.
the reconstitution of retail outlets, deleasing the land of retail outlets and adulteration. According to a survey, more than 70% of retail outlets/gas agencies have a Minister, an MP, an MLA or a corporator either in ownership or as a sleeping partner. Bribes are allegedly paid for the allotment of such outlets/agencies, which are recovered by adulteration or selling domestic cylinders in black to unauthorized consumers. The NCEAR(National Council of Economic & Applied Research) has established in its study that 38% of PDS kerosene is siphoned off for adulteration which is a Rs 15,000-crore industry nationwide (e.g Malegaon case). The Government made no sincere attempt to curb adulteration till date except bluedyeing kerosene in the late eighties and a recently launched Marker, which proved to be another fraud in a CBI inquiry where the Marker was purchased for Rs. 13,000 a litre from a blacklisted British company. The Marker was abruptly abandoned in 2008 after the CBI complaint and the draining of Rs. 200 crore of public money and could not be restarted even after three years, despite several announcements by Ministers .
Shockingly, land deleasing is another oily business. The HPCL/BPCL inherited a large number of retail outlets of foreign oil companies like ESSO/CALTEX/BURMA SHELL having land prices fairly low at the time of acquisition. However, now the prices have appreciated manifold and deleasing the retail outlet land fetches crores of rupees for owners. Ever greedy oil company officials and politicians allegedly fix the deal and the company ex ecutes it quoting a “VIP Reference”. The appointment of consultants and advisors is reportedly another source of corruption. Within a couple of months of an officer attaining superannuation he is appointed as advisor/ consultant at a hefty compensation with a cut for top company officials. The HPCL, according to informed sources, alone has at least 20 such retired officers back on its rolls. Appointing foreign consultants like those of Gallup, Thomson Associates, Mercer, Arthur D’little and Accenture in the name of improving productivity, performance evaluation and boosting employee morale has failed in its obj ective and proved to be an employment avenue for the wards of working and retired company and ministry officials.
The solution lies in making petro pricing transparent. The farce of “import parity” should be abolished and state taxes rationalized with GST. Kerosene should be market priced and any subsidy can be paid in cash/bank account through smart card/Aadhar card. The black in domestic cylinders being sold as nondomestic must be stopped forthwith.
The use of domestic cylinders be limited for households. A rational price mechanism for petrol and diesel would provide a much-awaited relief to the common man.
