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Government owned Oil Marketing Companies (OMCs) raised the price of petrol by Rs 6.28 per litre on May 23, 2012. After the inclusion of local taxes, this price hike amounts to an increase of Rs 7.54 per litre in Delhi. India met 76 per cent of its total petroleum requirement in 2011-12 through imports. Petrol prices have officially been decontrolled since June 2010. However, it has been argued by experts that prices of petroleum products have not been increased sufficiently in order to pass on cost increases to consumers. The inability to pass on international crude prices to consumers has affected OMCs more in recent months due to the depreciating rupee, which has further increased their losses. The total under recoveries faced by OMCs for diesel, PDS kerosene and domestic LPG for 2011-12 stands at Rs 138,541 crore. It was recently announced that the OMCs will receive Rs 38,500 crore from the Ministry of Finance to partially compensate for the high under recoveries. The prices of diesel, LPG and kerosene, which are responsible for the large under recoveries, are unchanged. Experts suggest that the price hike would have a limited impact on inflation, since petrol has a weightage of around 1 per cent on the Wholesale Price Index, whereas diesel has a weightage of around 4.7 per cent. The petrol price hike is unlikely to have an impact on the fiscal deficit, since petrol prices are technically deregulated. Reports suggest that a panel of ministers is due to meet on Friday to discuss diesel, kerosene and LPG prices. In a 2010 report, the Expert Group on "A Viable and Sustainable System of Pricing of Petroleum Products" (Kelkar Committee) observed that given India’s dependence on imports and rising oil prices, domestic prices of petroleum products must match international prices. It stated that price controls on diesel and petroleum in particular had resulted in major imbalances in consumption patterns across the country. This had also led to the exit of private sector oil marketing companies from the market, and affected domestic competition. Its recommendations included the following:
Reports suggest that a partial rollback of petrol prices might be considered soon.
Mr. Vaghul, our first Chairperson, passed away on Saturday. I write this note to express my deep gratitude to him, and to celebrate his life. And what a life he lived!
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Mr. Vaghul and I at his residence |
Our past and present Chairpersons, |
Industry stalwarts have spoken about his contributions to the financial sector, his mentorship of people and institutions across finance, industry and non-profits. I don’t want to repeat that (though I was a beneficiary as a young professional starting my career at ICICI Securities). I want to note here some of the ways he helped shape PRS.
Mr Vaghul was our first chairman, from 2012 to 2018. When he joined the board, we were in deep financial crisis. Our FCRA application had been turned down (I still don’t know the reason), and we were trying to survive on monthly fund raise. Mr Vaghul advised us to raise funds from domestic philanthropists. “PRS works to make Indian democracy more effective. We should not rely on foreigners to do this.”. He was sure that Indian philanthropists would fund us. “We’ll try our best. But if it doesn’t work, we may shut down. Are you okay with that?” Of course, with him calling up people, we survived the crisis.
He also suggested that we should have an independent board without any representation from funders. The output should be completely independent of funders’ interest given that we were working in the policy space. We have stuck to this advice.
Even when he was 80, he could read faster than anyone and remember everything. I once said something in a board meeting which had been written in the note sent earlier. “We have all read the note. Let us discuss the implications.” And he could think three steps ahead of everyone else.
He had a light touch as a chairman. When I asked for management advice, he would ask me to solve the problem on my own. He saw his role as guiding the larger strategy, help raise funds and ensure that the organisation had a strong value system. Indeed, he was the original Karmayogi – I have an email from him which says, “Continue with the good work. We should neither be euphoric with appreciation or distracted by criticism.” And another, "Those who adhere to the truth need not be afraid of the consequences".
The best part about board meetings was the chat afterwards. He would have us in splits with stories from his experience. Some of these are in his memoirs, but we heard a few juicier ones too!
Even after he retired from our Board, he was always available to meet. I just needed to message him whenever I was in Madras, and he would ask me to come home. And Mrs. Vaghul was a welcoming host. Filter coffee, great advice, juicy stories, what more could one ask for?
Goodbye Mr. Vaghul. Your life lives on through the institutions you nurtured. And hope that we live up to your standards.
Madhavan
