Released on = March 10, 2007, 4:14 am

Press Release Author = DMA

Industry = Government

Press Release Summary = There is growing unrest among the dealers and employees
working in the retail outlets of private oil companies as their jobs and investments
are under threat due to discriminatory policies of the Government

Press Release Body = New Delhi, March 8: There is growing unrest among the dealers
and employees working in the retail outlets of private oil companies as their jobs
and investments are under threat due to discriminatory policies of the Government
which are heavily loaded in favour of public sector undertakings. The threat is
affecting nearly 65000 people employed in the sector and large number of dealers who
had invested Rs. 1.5 - 2.0 crores each in these outlets.

These outlets were set up after the Government of India notified a new policy for
deregulation and marketing of petroleum products at the market driven prices. This
announcement on 1st April, 2002 declared that the consumer prices of motor spirit
and high speed diesel will be market determined with effect from that date.
Consequent to this policy rights were granted to private players which made heavy
investments in order to sell these products at market prices.

But contrary to this policy since mid 2004 the Government began to intervene and
prevent PSU marketing companies from increasing domestic prices as a result of hike
in international prices. The Government also compensated PSU marketing companies
through budgetary support in terms of oil bonds and discount given by upstream
players like ONGC. This non transparent process compensated PSUs for about 1/3 of
their under recoveries on Motor Spirit and High Speed Diesel in 2005-06 (Rs. 5931
crores out of Rs. 14964 crores) and fully in 2006 - 2007 (est. Rs. 20500 crores).

This private companies were left with no choice but to either absorb huge losses by
continuing to sell MS and HSD at same price as public sector undertakings or reduce
volumes through price increase. Any attempt to sell products at prices higher than
PSU oil companies resulted in no sale. The consumers are also suffering because they
are forced to buy from PSUs outlets only. This is also increasing the subsidy burden
on the Government as PSUs have to sell larger volumes.

The only solution of the problem lies in scrapping subsidies and taxes that co-exist
along with subsidized LPG and PDS Kerosene. This virtually eliminates the
possibilities of participation by private sector. One time reduction in Excise duty
can enable Government of India to eliminate subsidies in all forms and also help in
reviving private sector and assure in better customer service through competition.

The impact of any subsequent increase in International prices can be countered by
reducing Excise duty by Rs. 300/KL on HSD and Rs. 420/KL on MS for every dollar per
barrel increase in international prices or alternatively in steps of Re 1/litre for
both MS and HSD for every 3 USD/Bbl increase in International prices.

The other option is to pay subsidy to the private companies also as done in the case
of PSU marketing companies. Another alternative is to have fix subsidy per litre
which can be adjusted by oil marketing companies in both the sectors on duty
payments based on Excise paid with gate passes for removal of products from
refineries for domestic consumption. This is the pattern followed in the case of
Fertilizer Industry.

Web Site = http://www.askdma.com

Contact Details = J-1824, LGF, CR Park,
New Delhi-110019
Ph. No. 91-11-26270629
Fax- 91-11-26273511
dmanews@gmail.com