Energy; has it been freed
By: Amit Bhushan Date: 24/10/2014
We suddenly have a great surge in commercial media's energy levels with the 'Freedom' of energy pricing regime and the government leaving it to 'market forces'. The question arise what are market forces who now have this freedom. Economics says that market is place where there exist a large number of buyers (ultimate consumers) and sellers (producers and/or their agents) and can negotiate over prices. The point is that we have a limited number of producers and/or their agents in our 'markets' and buyers or consumers continue to suffer for choices that they may exercise. The import of fuels is still is either a license determine or is cumbersome capital intensive trade; its distribution is equally regulated. So why is media making it a consumer euphoria ? As far as the drop in prices by domestic PSU is concerned, it is more a result of the government persuasion rather than 'freedom or competition' since they will still be around to recoup their previously earned losses.
In a falling market like India, the foreign players may have wanted to own a piece and competition will have brought down the margins of refiners. It may have also resulted in building up of domestic storage capacities as well as distribution pipeline and this may have brought additional investments. The absence of a parliamentary oversight committee with investigations/research think tanks on such matters itself leaves open, a Pandora box of issues. Coupled with hyper-marketing by commercial media with deployment of public and private resources to obfuscate the matter, simply tends to ignore the 'extent of the art of possible that is called reforms; and therefore we are unable to measure the true success or value'. I am sure that independent think tanks do not intervene with the minimum governance mantra and could be of great help in delivery of maximum government, if used suitably. It may be of further interest to compare the formulas adopted for Gas and liquid fuels regards how they differ and with what impact on consumers, besides the bargain chips that the different classes of consumers could or could not employ due to such pricing methods and market structures. The impact on negotiating powers of players (i.e. different classes of producers/importers/exporters) as well as different classes of consumers, in a rising and falling market as well as stable markets as well as possible shock scenarios is open for different independent analyst to analyze and hypothecate.
Market making for energy products is not a matter of a day or for that matter can be solved with a single reform measure. This is a long drawn process provided the leaders is market are clear what they are set up for and maintain a clear path for the same so that the matter is interrupted due to legal tangles at any stage. Any short term measure designed to impress media personalities so that they go gung ho to sell it to consumers/voters/investors over a short term is fraught with risks and will have its payback for the leaders in government (and this is as per game theory). We still have a lot to go in the sector and I am sure the public is conscious of that.