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Oil marketing companies need to increase efficiencies and keep costs in check: Siddharth Zarabi


Updated: January 18, 2013, 5:46 PM IST
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Oil marketing companies need to increase efficiencies and keep costs in check: Siddharth Zarabi
How is the diesel price rise likely to affect the daily life of a common Indian?

How is the diesel price rise likely to affect the daily life of a common Indian? CNBC-TV18's economic policy editor & Delhi bureau chief Siddharth Zarabi joined IBNLive readers for an interaction on the issue.

Q. Why is the govt unable to put pressure on oil companies to improve efficiencies, given that the price rise has such a widespread impact? Asked by: gopalan

A. Price rise is an issue that should be foremost in the governments mind, but we have seen only half serious administrative measures. Better agricultural productivity is one of the ways out of this difficult situation.

Q. Why does the govt not rein in those who are using fuel inefficiently like rich rather than victimising essential commodities by raising freight and transport fuel Asked by: Sanjay

A. Better targeting of subsidies should happen through measures like Aadhar and direct cash transfers.

Q. Don't you think that the diesel price will see the inflation touching the sky? Asked by: Shaym Vadalker

A. The diesel price hike will have an impact of inflation, but the fiscal balance is also equally important.

Q. The government expects RBI to cut repo rates for growth of economy and the RBI governor expects the government to rein the inflation. Don't you think resultantly the common man is suffering? Asked by: Shaym Vadalker

A. The inflation vs growth paradox is an interesting one. But it is a known fact that unless inflation is moderate, interest rates will be used a tool for tightening monetary supply.

Q. Why is govt by throwing the excuse of subsidy hiding its misgovernance as other countries like US have been able to raise production through shale gas and shield its population Asked by: Arvind

A. You are right. The issue of lack of new exploration and oil, gas finds is a serious one and needs greater attention. Successive rounds of bids have seen tepid interest and more needs to be done in this regard.

Q. In your what should be the stance of Govt Of India Economy or the populist policy decisions ahead of 1 year before the general election Asked by: Mitesh Desai

A. Populism does not necessarily win elections, as recent history has shown. Electorates are intelligent and these days would like to vote for clean, good governance.

Q. How will the price rise impact middle class society? Asked by: Jeril

A. As we discussed--there will be a pass through of the diesel price hike on to customers across segments. If oil marketing companies gain Rs 12000 cr from the hikes, it can be assumed that producers and suppliers who have to pay more, will pass this cost on to end users.

Q. Does Diesel price hike directly proportional to hike in commodity prices. There are other factors that impact price rice. Many rich people drive diesel cars and pollute the environment as well. And deregulation is the way to go isn't it. What are your views. Asked by: Narayan

A. Good question. Diesel prices are a component of our wholesale price index. Any increase in the Fuel index of the WPI leads to an increase in the annual rate of inflation. Diesel usage is spread across sectors - Railways, Defence, Power, Telecom towers, Farm turbines and pumps, Land transport & other Industrial segments. The automotive segment - passenger cars - do not account for a huge part of diesel sales. Modern day diesel engine technology is not as polluting as earlier. Overseas, diesel is priced higher than motor spirit (petrol).

Q. It is often seen that media is pushing for raise in prices by speculating on them weeks and sometimes months before they are done like in Delhi Metro where they are speculating price hike in June so is it in hand in gloves with Govt so is it not against principles of journalism that for news it is forcing govt to take action. Asked by: Manav

A. Journalism requires us to put out news as it is sourced and obtained, faster than everyone else.

Q. Govt is saying that Rs 10 increase will offset the subsidy on diesel but in case prices are increased Govt is going to find some other scape goat for its inefficiency and will not sort out issues of corruption and corporate benevolence which are adversely effecting the country. Asked by: Manush

A. As we discussed, higher efficiencies are an absolute must.

Q. Why is the govt through committees of Rangarajan, Montek and Kelkar try to fleece public by raising prices as these people have only bureaucracy experience and no experience in oil and gas so govt should take some help from oil experts to raise productivity rather than increasing prices. Asked by: Hitesh

A. Strong words, but there is need for expert advice.

Q. Is there a way of managing costs of oil production and distribution without increasing cost to end customer? I am sure there are some best practices in other countries. Asked by: gopalan

A. It is a fact that oil marketing companies need to increase efficiencies and keep costs in check. Diversion of K-Oil and LPG as well as diesel is a concern that needs to be addressed.

Q. Kejriwal accused that companies like Reliance which have procured oil fields like KG Basin are not interested in increasing oil production but are hoarding oil and forcing govt to raise prices 2$ to 14$ which is against national interest so how much is corporate blackmailing responsible for fall in production Asked by: Ravi

A. The argument is more technical and cannot be seen as only an emotional debate. There are reasons that have been expressed by the developer regarding field status and the government seems to have accepted them.

First Published: January 18, 2013, 5:46 PM IST
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