When it comes to disinvestments of loss making public sector or reforms in insurance sector or paying interest at market rates for deposits in the provident fund, the Left gives little room to the Government and most of the time they have to roll back their programmes. The latest victim of it is the oil sector where prices have not been allowed to be raised even though the prices of crude have touched above 50 dollars mark. The result is that the oil sector, a bright spot in otherwise a dismal record in public sector, is heading towards a disaster.

The latest results announced have shown that IOC, the single largest entity in public sector has shown a dip of thirty per cent in its profits. If the present trend continues, it will not be long before it starts making losses. The same is true of other public sector undertakings in oil sector like BP, HP and IBP. Even at this stage, the Left is continuing to insist that prices of items like Kerosene and diesel or LPG used for domestic cooking should not be raised. The result is that oil sector is heading for serious trouble while Ministers dealing with Finance, Oil and Commerce continue to plead with Left leaders who have emerged as new Centre of power.

The result is that some very unusual ideas have been floated to meet the problem created by the Left’s insistence to keep the oil prices fixed while the international prices continue to shoot up. If remedial action is not taken soon, the burden of subsidising oil products will soon fall either on Government which is struggling hard to balance its books or on oil companies by moving them into the list of loss making units. One proposal is to cut the drawback duty on exports of oil products to make up the deficit.

To say the least, this would be remedy, which would be worse than the disease. For instance, it has to be understood that principle of duty drawback is that no country can afford to export its taxes while exporting its products. The exporters of oil products are compensated only to the extent that they pay duty on import of crude. This policy has the endorsement of international bodies like WTO and is used widely to help the export drive. It is an accepted norm that for export, raw materials should be available at international prices.

In case this policy is given up under pressure from Left, India could say goodbye to its dreams of becoming a world hub for oil refining due to its strategic location. It will also end the dream of present oil minister Mani Shankar Aiyer to reduce the burden imposed on the country by oil imports by exporting in turn the refining product. It was in this context, the Minister had told the Parliament that he would like the public sector oil companies to follow the example of private sector in exporting oil products. At present, most of the exports are being done by private sector firms. This also had the blessing of the Government as India has surplus refining capacity in oil sector. It was a continuation of this policy that oil minister was hoping to persuade Pakistan during his coming trip to buy its diesel requirements from India, which will reach them easily and at price and quality comparable with the best in world.

Yet another trial balloon floated is that the refining units may be compelled under the Essential Commodities Act to produce Kerosene and also sell the same at a price lower than the cost of production. Besides the legal loopholes in such a scheme, it would also bring back the days of license permit Raj with all its consequences. In case, the Government is keen to produce Kerosene, the best way will be to make it essential for all refineries to produce certain quantity to meet national demand to create a level playing field instead of punishing few selected refineries which have achieved success in field of exports.