Fast forward to the present. The Gazette notification stands unaltered. The private sector does indeed have access to EP, refining and marketing. The APM remains abolished and the public sector companies have formal autonomy to operate outside the ambit of bureaucratic control. This is the ‘de jure’ current situation.

The de facto reality is, however, radically different. Competition is minimal; the public sector continues to dominate the sector. Prices are not set by the market; the government dictates them. Subsidies on LPG and kerosene have not been removed; they remain and the oil companies continue to bear the burden.

The sector has, in short, been stealthily re-regulated.

The implications of this disconnect between de jure policy and de facto reality are serious. At a quantifiably tangible level, the disconnect is eroding the financial health of the oil companies. This is because the government administered price of petroleum products is lower than the market cost of producing them. Estimates vary but the most frequently reported numbers suggest that the PSUs will lose about Rs 50,000 crore over this fiscal year.

At a broader level, the disconnect is diluting the efficiency gains that derive from competition and it is undermining the capability of companies to fund R&D for the development of clean technology and renewable alternatives to fossil fuels. Competition is being throttled by the policy skew in favour of the PSUs. The government compensates PSUs for part of their losses through the issue of oil bonds and subsidies. These concessions are not available to the private companies. As a result the private companies have been compelled to reorient their marketing plans. Reliance has, for instance, recently converted its refineries into an Export Oriented Unit (EOU).

... contd.