Ram Naik repeats pledge for early abolition of APM

Vol 3, PW 23 (08 Dec 99) People & Policy

Encouraging noises are again coming from oil minister Ram Naik with regard to reform of the archaic Administered Pricing Mechanism (APM).

In India, the APM keeps the price of Essential products such as kerosene and LPG (used as cooking fuel) at artificially low levels with subsidies paid for by taxes on Non-essential products such as Motor Spirit (MS) and Aviation Turbine Fuel (supposedly middle-class luxuries). A time-frame for dismantling the administered price regime will be finalised quickly, Naik told a seminar of oil industry officials and bureaucrats on Friday (3rd December), The initial thrust of reforms has yielded some results and now it is time to push ahead with the balance of the reforms agenda.

This is not the first time Naik has promised to accelerate the abolition of the APM and it will not be the last. According to current thinking in the oil ministry, full decontrol could take place as early as next year or the year after, a full year ahead of the scheduled date of abolition on March 31st 2002.

A former revenue secretary NK Singh, a key official in the Prime Minister's Office (PMO), is spearheading the move to accelerate the move. In recent weeks the widely-respected Singh has emerged as the link between the PMO and the petroleum and finance ministries and is said to be very closely involved in the process to bring in full decontrol ahead of schedule.

For his part, Naik has spent the past few weeks trying (unsuccessfully) to persuade finance minister and party colleague Yashwant Sinha to bring down the import duty on imported crude from its present level of 20%, a move that would help suffering Indian refiners. Sinha, however, has reportedly refused Naiks request and instead told him to hike the price of LPG and diesel a move expected any day and one that will provoke inevitable howls of criticism.