When Ram Naik met Ram Vilas

The calculation is simple. Today, on an average, the subsidy on each LPG cylinder is Rs 80. One crore new connections of LPG means that there will be a fresh annual demand for around 10 crore cylinders — each family uses around ten LPG cylinders in a year. That adds up to an additional subsidy of around Rs 800 crore. That’ll be from the oil pool account directly.

Add to this the cost of the empty cylinders — Rs 900 each — which is borne by the oil companies. Given the mechanics of distribution of LPG cylinders, for each registered connection, the oil companies need to buy 1.5 cylinders customers keep one in their house while ordering another, for instance. So, for one crore fresh LPG connections, the oil PSUs will have to buy 1.5 crore cylinders, or spend Rs 1,350 crore from their own pockets.

The oil companies have been arguing that they be compensated for this it is the government that wants to push LPG use so dramatically but there has been no response so far. That’s hardly surprising, because if, for instance, the oil pool account was burdened with another Rs 1,350 crore this year, the cat would be out of the bag. Everyone would get to know, and perhaps, the Prime Minister would pull up Ram Naik for distributing largesse at a time when the government’s overall dictum is to cut costs wherever possible.

This, unfortunately, is not the only instance of how the government of the day is hitting the oil PSUs. Thanks to the policy, not just of Ram Naik but that of the entire Cabinet, the oil pool deficit has shot up to around Rs 7,500 crore today. Under the current system, the government overcha-rges customers on items like petrol and aviation fuel, but subsidises ker-osene and LPG the extra subsidy is not borne by the budget, but forms the oil pool deficit. This is to be retu-rned to the oil companies at some po-int, but the delay is so large that oil firms are stretched for cash. A few ye-ars ago, for instance, the deficit had become so large that the cash-starved oil companies had put their expansion plans on hold, and there was a distinct fear that IOC would not be able to continue even its oil imports. At that point, to tide over the immediate crisis, the government issued oil bonds to these firms, and redeemed them over the next few years.

What the government is doing when it comes to the daily running of the PSUs is far worse. Blue-chip firms such as ONGC and HPCL don’t have permanent heads the current incumbents turned 58 some time back and should have been given two-year tenures, instead they operate on two or three-month temporary extensions. And GAIL’s chairman retires in a few months, but even the search for his successor hasn’t begun as yet. Both HPCL and ONGC have two senior directors who, like their chiefs, continue on three-month leases of life.

Needless to say, this keeps the oil firms firmly in the ministry’s grip.This complete lack of autonomy, despite the navratna status of the big oil firms, is reflected in other areas as well. Today, the oil companies need to appoint around 7,000 dealers for petrol pumps as well as LPG agencies, to meet the increased consumer demand. Guess who’s going to appoint these dealers? The government! After sorting through the various `recommendations’ that usually come at such times, Petroleum Minister Ram Naik will soon finalise the composition of dealer selection boards. And if these boards are not stuffed with favourites, and the boards are then able to withstand the pressures brought upon them to appoint favoured dealers, hopefully they will then select the best dealers for the oil companies.

That, you’ll agree, is a lot of ifs and buts for the oil companies, whose competitiveness will depend on these very dealers. What makes this all the more frustrating for the oil PSUs is that the oil sector will be totally opened up by March 2002 at that time these shackled PSUs will have to compete with the likes of local and global majors like Reliance, Shell and so on. If the PSUs aren’t able to do so, it’ll be because of people like Ram Naik and his cabinet colleagues. But who cares. Let’s lord over them till we can, is the dominant political view of the day.