Anyone here for the consumer?

Broadly, the Sengupta committee was constituted to suggest what kind of measures needed to be taken by the government after 2002, when the oil sector is to be totally decontrolled, toensure that the medium-sized as well as the smaller companies such as Hindustan Petroleum HP-CL, Bharat Petroleum BPCL, or the stand-alone refiners like Cochin Refiner-ies and Madras Refineries and the independent marketing company IBP, were not wiped out by the the huge Indian Oil Corporation IOC, which today controls over half the entire oil sector. With its tie-up with the mammoth Reliance refinery, the IOC stranglehold is set to increase.

It was in this context that the Sengupta committee recommended that some of the stand-alone refineries be given to BPCL, and that BPCL and HPCL along with IBP form a strategic alliance. Theoretically th-at sounds attractive. The best way to compete with a giant is, clearly, to become giant-like. For the companies concerned, that is in this particular case, though, several of the smaller companies such as Madras Refineries and IBP didn8217;t think they had much to gain from being taken over by larger companies.

But what about the poor consumer? What may be goodfrom the point of view of the oil companies8217; profitability isn8217;t necessarily good for him. After all, as any undergraduate student of economics will tell you, while monopolies are not good for consumers, duopolies or oligopolies aren8217;t much better either. If monopolists dictate what market practices are to be either through their pricing structures or through their service then duopolists or oligopolists usually collude to do the same thing. In other words, the customer continues to get short-changed. In the Indian case, for example, as any oil company will tell you, customer service has been deteriorating each year with adulteration in most fuels increasing and the waiting period for customers increasing 8212; how many decades ago was it that, while filling petrol, your battery water was checked automatically by the petrol pump attendant, or your windscreen wiped?

Sengupta, of course, can be excused for not stressing this since his terms of reference were really about figuring out ways to protect theinterests of the companies, not the consumer. But, surely, the petroleum ministry should have paid some attention to the interests of consumers before just rubber-stamping Sengupta8217;s proposals?

After all, in most developed countries in Europe or the US, such mergers or alliances are approved by anti-trust authorities who examine whether or not the proposal will hit consumer interests. Without exception, all major mergers, be it British Telecom with MCI in telecom or the various pharmaceutical and oil majors, have to be cleared by the anti-trust regulators. The current protracted hearings about Microsoft8217;s alleged anti-trust behaviour in the US, in fact, are eloquent testimony to how seriously consumer rights are taken in developed countries. In the case of Micros-oft, for example, the extent of the damage to customers is not exactly quantified. What is being alleged is that with its trade practices, it was preventing competitors from growing and, in the process, hurting consumer interests.

Nor is this thefirst opportunity that the petroleum ministry has lost for ensuring that consumer interests are taken into account in these mega-mergers or alliances. With no regulator for the oil sector in place even now, and the Monopolies and Restrictive Trade Practices Commission woefully short-staffed and under-budgeted, for example, it8217;s obvious that consumer interests were given the go by when, last year, Reliance began negotiating with IOC for picking up stocks from its mammoth Jamnagar refinery for a ten-year period to begin with. Sure it doesn8217;t matter right now, with the government regulating prices for important products in the oil sector. But, come 2002 and these are freed up, the Reliance-IOC agreement could surely have serious anti-consumer consequences.

It would, of course, be unfair to blame the petroleum ministry alone, or just the BJP government, for this lack of concern for the consumer. In the current case, for example, the petroleum ministry8217;s recommendations will have to be cleared by the Cabinetand, since the BJP government has fallen, it will be up to the new government8217;s cabinet to approve the decision.

Chances are, however, that even the new government, whenever it comes in, will be guided primarily by the interests of the oil companies and not of the consumers.