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Q. Need to reform oil sector: In the backdrop of increasing crude oil prices, discuss the need to reform oil sector.
Dec 17, 2016 Related to : GS Paper-3

Ans :

Introduction-

The global crude oil prices have been almost doubled in last one year. It is matter of macroeconomic concern in the face of weakening growth momentum, a strengthening dollar and rising global interest rates. India import an overwhelming share of our petroleum crude requirement, and it is vital that the global rates promptly show up as dearer retail prices so, India must reform its oil sector.

Reforms undertaken-

  • The retail prices of the main petroleum products, diesel and petrol, have been decontrolled in the last couple of years, and the subsidy on cooking gas is now rightly capped. 
  • The subsidy on kerosene is also to be better targeted using Aadhaar cards, so as to avoid artificial, grossly subsidised rates that merely encourage adulteration of automotive fuel. Hence there is need of comprehensive reform policy.

Need of further reforms-

  • A large, increasingly outward oriented and supposedly fast reforming economy can no longer assume away global prices. The fiscal deficit is increasing and it may go up further.
  • In fact, we now need to fast forward pending oil sector reforms to shore up investor interest. Instead of continuing, in effect, to ring-fence the retail oil segment only for oil majors, we need to open up oil marketing for the larger retail industry. 
  • In the mature markets, independents oil retailers account for up to half of all retail oil sales. Hence a policy on independent oil retailers can well mean more competitive prices, together with attendant services. 

Conclusion-

Global oil prices are increasing in the backdrop of agreement reached by oil producing countries. In fact it is almost doubled in last one year. In this backdrop India must bring oil sector reforms as it already facing huge fiscal deficit. It is high time bring comprehensive reforms in oil sector. 


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