After a long pause, retail fuel prices have been inching up over the past week and have crossed the ₹100-litre mark again in several parts of the country, while LPG cylinder prices have been hiked by ₹50. India officially has a deregulated pricing regime, but in recent years, this practice has been put on hold during election campaigns. Is the fuel pricing policy problematic? D.K. Srivastava and S.C. Sharma discuss the question in a conversation moderated by Vikas Dhoot:
How has India’s fuel pricing regime evolved in recent years, culminating in the so-called deregulated pricing regime?
S.C. Sharma: The story of dismantling oil prices starts from 1997. In 1995-96, India had an import dependency of about 65%-70%, so the government thought of moving from an administered price mechanism on a cost-plus basis to market-determined consumer prices for petrol, diesel and other fuels. The Nirmal Singh Committee made recommendations in late 1996 and it was decided that the oil pricing mechanism would be dismantled gradually from 1997 till 2002, from 75% in the first year to 100% by April 2002. Ram Naik, the Petroleum Minister in 2002, announced full dismantling as oil prices were comfortable.
