RailEnquiry

NEW DELHI: The dual pricing regime for diesel - market rate for bulk consumers and gradual increase in pump price - will hit the aam aadmi by pushing up bus fares and cost of backup power supplied to housing societies.It will also bring rail fares, which were raised recently, under pressure and increase cost of housing construction, mobile tower operations and malls.Industry watchers said till the fuel's pump price gets aligned with the market rate, dual pricing will also spark large-scale diversion from retail outlets and work to the disadvantage of state-run fuel retailers.At current rates, bulk consumers will have to pay Rs 10.81 a litre more for diesel than Rs 47.15 it costs in Delhi's pumps. For starters, it will push up the railways' fuel bill by Rs 2,500 crore per year and derail efforts to put finances back on track by increasing passenger fares last week.In the short term, state oil marketing executives said, dual pricing would spark a run on their retail outlets. "It will not be possible to monitor where the subsidized diesel is going... anyone can come with a barrel to a pump and buy... a lot of pump sale will start getting diverted," a top executive with a retailer said.Once the dual pricing regime kicks in, private refiners such as Reliance Industries Ltd and Essar will muscle their way into the bulk sale business by offering discounts. State-run retailers will not be able to put up strong competition as they will still be suffering poor cash flow due to the subsidy element in their retail sales.

Besides, private refiners have a bigger muscle to flex since their refining margins are better than state refiners due to modern plants and coastal locations, bigger leeway in terms of hedging and high-sea deals in crude procurement. With old plants and inland locations, huge manpower and straight-jacket procurement processes, state refiners will be at a disadvantage.

"We are not opposed to entry of private sector. True, our bulk sale business will become vulnerable. But that will be market dynamics and we can tackle that. We want full reforms and deregulation for all segments. Dual pricing will only skew and confuse the market further without fully resolving the subsidy problem," the executive said.