The government’s policy on competition was defined by the gazette notification of April 2002, which stated that the petroleum sector should be deregulated; that the administered price mechanism should be replaced by market based pricing, and that private companies should be encouraged to invest across the entire value chain.  There were conditions attached but the underlying message was clear. All companies,whether public or private, that met these condition would operate on the same playing field.

The notification continues to define the current de jure policy.  The de facto reality is of course very different.  The government has reintroduced administered pricing of petrol and diesel and it has not removed the susidies on LPG and kerosene.  This in itself does not skewer competition. All players can still be treated equally even under the current circumstances of re-regulation.  Competition gets circumscribed when the rules of the game favour one group over another, as is the case today.  The government has ‘used’ re-regulation to tilt the field . Thus government companies are granted oil bonds to compensate them for the losses that they incur on account of the differential between the ‘administered’ selling price of products and the international cost of procuring the crude.  The private sector receives no such compensation.  Public sector LPG marketers are subsidised but there is no subsidy for private players. The consequence has been the almost total retreat of the private sector from the oil products  market.  What adds grist to the mill is the fact that private companies had to invest Rs. 2000 crores in prescribed oil industry infrastructure to secure the  marketing licence and they did so on the assurance of comparable terms and conditions with  public entities.

... contd.