Wednesday, June 18, 2008

CII roundtable on oil price

by Jo Black

The cost of price adjustment has to be borne by all stakeholders including consumers, Oil Companies and the Government, was the consensus among the panel of experts at a Roundtable on Oil Price: Implications for India organized by CII.

Dr Jahangir Aziz, Principal Economic Advisor, Ministry of Finance while addressing the Roundtable said that a more balanced and broad based policy to contain the Oil Price implications on the Indian Economy is needed.

While highlighting the factors that have contributed to the hike, such as supply constraints and increasing demand pressure from emerging economies, he pointed out that the policy package has to be credible and tenable to have an impact.

Mr. Sunil Kant Munjal Past President, CII & Chairman Hero Corporate Services described the present situation as unprecedented.

A situation of global slowdown, moderating growth in some sectors of the economy, stress on the fiscal deficit and high inflation in the domestic economy presents the government with a tough balancing act.

In this situation the increased oil price should be passed as the fiscal deficit is moving northward.

Mr. Surjit S Bhalla, Managing Director, Oxus Investments Pvt Ltd has said that policy should be based on long-term prices of oil rather than its spot market price.

At US $ 130 a barrel, the burden of under recoveries if not passed through would account for Rs 500 billion ($12.5 billion), which is 1 per cent of GDP.

While addressing the roundtable, Mr. O.P. Pradhan, Executive Director, Hindustan Petroleum Corporation Ltd, said that the transport sector accounted for 45% of total petro-products consumption and expected this level to increase upto 55% in the next 8 to 9 years.

He also highlighted the importance of promoting energy efficiency and target reductions in energy consumption through better infrastructural facilities in the transport system.

Mr. S. Thangapandian, CEO Marketing, Essar Oil Ltd, commented that there is a need for a more market determined pricing mechanism and well targeted subsidy system to insulate the needy from the unprecedented increased in oil prices.

Concluding the session, Mr. Hari S Bhartia, Chairman, CII Energy Council & Co-Chairman and Managing Director, Jubilant Organosys Limited, said that there is a greater need to tackle the issue and opined that for a more balanced and equitable policy package, the economy should be allowed to feel the impact of the oil price surge.

It would facilitate adoption of energy conservation measures.

 

 

 

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