Flashback to the period 1994 to 1998. The government sets up a committee to deliberate on the liberalisation of the petroleum sector. This committee is referred to as the ‘R’ (Reforms) Group. It is chaired by the Secretary, Petroleum and comprises the elite of the industry including Mukesh Ambani, Aditya Birla and the chairmen of the major public sector companies, Indian Oil, ONGC and GAIL. The terms of reference of the committee are unambiguous. The sector needs to be unshackled from government control; competition should be encouraged and the market must replace the bureaucracy as the core determinant of pricing and resource allocation.

The committee proposes a three-phased deregulation. First, exploration and production must be thrown open to private participation; thereafter, the limits on investment in refining and distribution should be removed and finally the private companies should be permitted to market transportation fuels (gasoline and diesel). In this final phase, the Administered Pricing Mechanism (APM) should be replaced by market determined pricing and the subsidies on LPG and kerosene should be either abolished or if continued paid out directly from the government budget rather than through the finances of the oil companies. The report proposes that these three phases be implemented no later than April 1, 2002.

The report is presented to the government in 1996 and after the expected round robin of bureaucratic and political questioning, it is approved by the cabinet and gazetted as policy in 1998. The bulk of its recommendations are then implemented on April 1, 2002.

... contd.