22 June, 2021

Drill's Over

The APM dismantling may see 'somewhat' lower prices but it will be awhile before the whole mechanism is in place

Madhu Kapparath
Drill's Over
With the pmo clearing the last hurdle in dismantling the administered price mechanism (apm) on petroproducts last month, bureaucrats are working overtime to end the five-year-long process of deregulation by March 31, 2002.

Since 1976, the apm has compensated oil producers, refiners and marketers on the operating costs and assured them a return on their assets, as prices were kept low (or high) to allow what the government thought was judicious use of the imported high-cost fuel and its products. The pricing mechanism clearly undercut efficiency but encouraged a massive expansion of oil infrastructure by underwriting investment risk. What shape will the oil economy take when it's finally liberated from price control?

More importantly, will April 1, 2002, see the beginning of a stiff race between domestic and multinational corporations for transportation, pricing and marketing of domestic fuels, till recently controlled by the state-owned oil and gas companies—ioc, bpcl, hpcl and ibp. And will this lead to subsequent gains for the consumer?

Not immediately,...

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