Volatility in crude oil pricing cannot be left unregulated; measures should be put in place to check unhealthy, speculative, over-the-counter trading in the paper barrels, said Mr R.P.N. Singh, Minister of State for Petroleum and Natural Gas.
The reasons for the fluctuation in crude oil pricing need to be examined in greater detail, he told Business Line .
India has taken a strong stand on the issue at various international forums and was pitching for a price that is affordable for all, he said. Crude oil pricing in India is linked to the international parity principle.
The Indian crude oil basket — the price at which Indian refiners source oil — has dropped by 3.7 per cent from October 3 to 5. On October 5 it was $98.86 a barrel, down from $102.73 a barrel on October 3.
“This volatility is a concern. All stakeholders — consumers as well as producers — need to work out a mechanism where there is more transparency in the system. Why is it that despite a slowdown in the economy, prices keep rising? An answer to this question needs to be found,” he said.
On the domestic front, he said, petroleum refining pricing too has been linked to the international trade parity principle. India has witnessed a slow revolution and has emerged as a major export hub in recent years.
In 2010-11, refiners exported 56 million tonnes of petroleum products valued at about $40 billion, making it the largest foreign exchange earner in the merchandise category, he said.
Mr Singh agreed that the most efficient way of dealing with subsidies (diesel, domestic LPG, and kerosene are sold at a controlled price in India) is when it is targeted effectively. To plug leakages in the public distribution system and eventually bring down the subsidy burden of the Government, a task force has been set up to implement a phased plan for direct transfer of cash subsidy to the beneficiaries.
“We expect that at the end of this exercise over a three-year period, dual pricing in kerosene and LPG will come to an end and products will move at a single market price, with the cash subsidy only for intended sections of the society, being transferred directly to their bank accounts,” he said.