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Hema Ramakrishnan
Balaji C.Mouli

"The Railway Ministry's plans have come to naught following the decision amongst state-owned oil companies to maintain the status quo on the distribution arrangements for two years after the dismantling of the administered pricing mechanism (A PM) from March 31, 2002,'' said official sources.

NEW DELHI, Jan. 20

THE Railway Ministry has shelved plans to have variable tariff rates on petro-products from the ensuing fiscal, following the recent agreement amongst public sector oil companies to continue with the existing dispensation on distribution of petro-products up to 2004.

According to officials, in the wake of such an agreement, the Railways lacked the flexibility to negotiate different tariff rates with each of the oil companies.

"The Railway Ministry's plans have come to naught following the decision amongst state-owned oil companies to maintain the status quo on the distribution arrangements for two years after the dismantling of the administered pricing mechanism (APM) from March 31, 2002,'' said official sources.

Since the proposed joint venture between Indian Oil Corporation and Reliance Petroleum Ltd (RPL) is not taking off, only public sector petro-products distribution companies are involved in the `hospitality' arrangement.

A positive fallout of the joint agreement is that it would avert any major disruption in the rail movement of petro-products in the post-APM regime.

"The Railways is unlikely to face any major problems as linkages will not change drastically even after de-regulation, since the existing hospitality arrangements between different oil marketing companies will continue for another two years,'' said officials.

Under the current dispensation, decisions on the movement of petro-products including rail movement and on the linkages are taken by the Oil Coordination Committee (OCC).

The OCC, which is an umbrella organisation of the oil industry, also reimburses payments made by oil companies to the respective refineries.

Post-APM, the OCC will cease to exist and payments will be made directly by the oil companies. The changes in linkages, if any, would have also impacted freight costs and cost calculations for the oil industry. Rail movement of petro-products is, however, set to be lower than the targeted level of 37.50 million tonnes in the current fiscal, mainly due to the decline in demand for high-speed diesel.

Indications are that rail traffic movement of petro-products would be around 36.50 million tonnes i.e., roughly the same level as last year.

Although POL (petrol, oil and lubricants) accounts for roughly 7.5 per cent of the total targeted freight traffic of 500 million tonnes for the current fiscal, it is a major revenue earner. The projected revenue realisation through POL movement is around Rs 2,837 crore. To attract more POL traffic, General Managers were, for the first time, given the powers to fix station-to-station rates for petro-products.

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