Open up petroleum marketing as well

Open up petroleum marketing as well

It is welcome that public sector oil retailers plan daily revision of automotive fuel prices in five cities from May 1, with nationwide rollout of the “daily dynamic pricing” policy planned later this year.
It would be in line with global practice, and better align the going rates for crude oil imports with retail prices of petroleum products. It is essential to do so, to determine domestic scarcity value, as much of our growing requirement of crude is met by way of imports. However, in tandem, it is also vital to reform and overhaul market design for retailing.
However, in tandem, it is also vital to reform and overhaul market design for retailing petro-products. The continuing policy of ring-fencing retail sales of petro-products exclusively for oil companies is both anachronistic and incongruous.
It is also not as per the best international practice. Worse, it implies a huge national cost. Given the large and fast-growing domestic oil sector — India is now the third-largest importer of crude — the tight effective monopoly in retail sales of petro-products creates scope for padding costs. Abroad, in the mature markets, independent oil retailers account for about half the off take of oil.
We need to speedily integrate oil into the larger retail industry. It would lead to more competitive oil prices, boost convenience and likely improve service quality as well.
In parallel, we also need speedy rationalisation of taxes on oil. We need to drop the perverse tax-on-tax and cascading rates across the value chain in oil. Petroleum products are to stay out of the goods and services tax framework, for now. But the Goods and Services Tax Council needs to firm-up consensus to bring petro-products into the goods and services tax regime at the earliest.
However, it would be sensible to duly cap input tax credits for oil products, to factor in externalities like pollution and impact on climate change.