All the developed economies and major emerging shining economies have high taxation regime on fuel prices, said
Dharmendra Pradhan, Minister of Petroleum and Skill Development.
Speaking exclusively to CNBC-TV18,
Pradhan said government is very concerned about petroleum product price impact on all consumers and is working with interim finance minister Piyush Goyal to deal with it. Watch: Saudi Arabia has assured me of a review of the production cap, says oil minister Dharmendra Pradhan
He said government has nothing to do with oil price build up and oil marketing companies are free to decide on fuel pricing.
I want to start by asking you about that crucial meeting that will take place in Vienna the OPEC (Organization of the Petroleum Exporting Countries) meeting. All eyes now on the decision that OPEC is likely to take. Will there be any relaxation as far as the output ceiling is concerned? Will we see output being increased currently capped at about 1.8 million barrel per day? What is India's position, what are you hoping for?
It's not exactly, now 1.8 million per barrel. It's much more than that due to some unavoidable situation in the international arena, there is a crisis in Venezuela, there is some issues with Nigeria and other parts, so now effectively the count is around 2.5 million barrel per day. There is a very serious issue that is the concern. Now, publicly two important stakeholder, one from OPEC - the leader of the OPEC, Saudi Arabia and Russia, both on them has to publicly position. We have to revisit the issue of OPEC cut and I am hopeful what they assured us in a different forum that there will be a revisit on this production cut issue. Certainly, if they are going to revisit this issue, I am hopeful there will be a softening impact on price also.
Let me just pick up on the point that you made? You said that India has been given an assurance by Saudi Arabia that there will be a review of the production ceiling cap. What kind of an assurance has Saudi Arabia given India and also has there been any assurance, similar assurance has come in from Russia?
No, there is a joint declaration by Saudi Arabia and Russia.
You said that the minister called you in a telephonic conversation assured India about the review?
Yes, on behalf of Russia also he assured me. We are the two important stakeholders of this important decision on production cut by OPEC and we are jointly going to revisit the issue. So, I am confident, they are also concerned about the energy security of the world. They are a producing country, their economy is also related to production, how much production they are going to do? What rate they are going to offer, all these factors are also influencing their domestic economy. Looking into all this scenario as a responsible stakeholder in OPEC and as oil producing country, they also have an eye on the world issue and I am confident everybody is going to behave rationally.
While you hope that people will behave rationally, most people also do seem to suggest that while there is likely to be a degree of perhaps moderate relaxation in the production cap the geopolitics is going to weigh on the minds of policy makers. If I look at what forecasters or what people who track the oil markets are saying, for instance IHS Markit Daniel Yergin believes that prices will be kept in the $75-85 region even post this OPEC decision that is currently pending what is your own assessment?
OPEC production cut revisit is one issue, but there is huge question mark on this sanction on Iran. What is going to happen in the Venezuela in near future? What are the other issues related to oil production and what is the sentiment of market? How the dollar behaving vis-à-vis the currency of emerging markets? All such things are related. I agree with Daniel Yergin that revisit on capping issue is not the only solution, there are multi-dimensional issue involved in the topic. We want to push forward our case, our interest and I am categorically saying it again and again, being a big consumer, this high bandwidth of crude oil price is hitting our economy and producing countries should look into that aspect also.
Let me ask you about what our position is now when it comes to Iran in the context of the sanctions that have been imposed by the United States unilaterally? There is a committee that is assessing the situation, what have you mean able to arrive at by way of a solution on how you will tackle Iran?
There are two issues. One, will there be any crisis of the supply chain? I don't think so. India is a very stable market. Our relationship with oil producing countries is very cordial, very vibrant, so we don't see any supply disruption of our requirement.
What about payment disruption?
There will be no supply disruption from the oil producing countries, but let us wait and watch how things are unfolding, what kind of identification will be there from American side, how it will impact the entire economic model, let us see that as it's too early. Some of our colleagues visited European countries and we are assessing the situation but we are prepared for any kind of eventuality.
What is that plan b? Because by November, European banks will not be able to deal with the payment related to Iran. So, what is plan b that India is hoping to put in place?
Let us wait and watch. It's too early to spell out any kind of thing, these are very sensitive and multilateral issues are involved in all this issue, let us not speculate. I can assure one thing, there will be no scarcity of products due to this kind of situation.
Let me then ask you about the situation at home. We have seen some degree of cooling off as far as retail prices are concerned and that is because globally crude prices have come off. However, given the fact that globally crude prices are expected to remain on the higher side, what is the government's thinking? The last time you spoke publicly or we had now the interim finance minister Piyush Goyal speaking publicly , the views was that a long term plan is being put in place, what is this long term plan? Is it still being worked at or is the government now hoping that retail prices will cool and so it is a hands off approach for now?
This government is very much sensitive, very much committed to interest of the commoner, interest of the poorest of the poor, interest of the middle class. We will ensure every possibility that petroleum products should be well within the reach of these categories - farmers, poor and middle class. The entire strategy of this government is to create a sense of assurance and it will be well within their purchasing capacity. International price, exchange fluctuation, taxation, these are the factors for the price build-up. If we can deal with one issue, other two may not complement. We have to work in tandem, that is what me and my colleague Piyush Goyal have categorically reassured all the stakeholders that be assured, this government is sensitive, we are concerned about the issue but one issue is not going to solve everything and certain things, certain elements are not in our hand.
What happens to global crude prices may not necessarily be in your hand but taxation is in your hands and there people would argue that the government has not shown sensitivity when it comes to tax related policies. This is a sector that continues to be taxed very heavily in comparison to our peer countries, in comparison to what is happening globally, taxes are extremely high and have continued to be on the higher side given the fact that the government has continued to enhance excise duties. So, on that I don't know if your argument of sensitivity will fly. So, if you are talking about a series of measures that will be executed in parallel, what can we expect, what is the thinking, what is the timeline?
There are two aspects to this kind of argument, should we use all our eggs at a go, all our strategy at a go. As I said, this is a multi-dimensional issue. So, when I am saying we are sensitive, we will ensure every possibility that accessibility of the common man will be well within the affordable rate.
Secondly, you spoke about the high tax rate, let me share my information. All the developed economies, all the major emerging shining economies are with this kind of taxation pattern which we have today. In our taxation system there are two parts, one is put by states and one is put by union government. In last October union government took responsibility and reduced some component of excise tax and when I am saying we are concerned about the issue, we want to react at an appropriate time.
What does that means that you want to react at an appropriate time? Again as I asked you is the view of the government that since we are seeing globally crude prices cooling off and there has been a degree of relief at the retail front as well that you will not act today you will wait to see how the situation pans out and then act is that what we should understand?
One reduction is not going to solve any problem. It has to be well timed, it has to be looking into the geopolitics and we will ensure the affordability. When I am saying the petroleum product will be well within the reach of the poorest of the poor and middleclass that implies everything.
Are you waiting for the elections season to kick off? We didn't see prices being tinkered with during the Karnataka elections. October to May is going to be the election season is that then the appropriate time that you are talking about?
Government has nothing to do with price build-up mechanism. Companies are autonomous and independent to have their own price mechanism. Government never interferes. Consciously, we have de-regulated the price after October 14. We are not involved in the price mechanism. Autonomy is given to company. Number two, this is not an election centric issue. Yes, all these things influence election, but consciously we have taken this path for the interest of the common people for a long term we have to have a market driven price mechanism.
Let me just ask you two-three specific question to deal with this? Your own spokesperson, BJP spokesperson on our show said that oil marketing companies are operating a bit like a cartel and on the second point that you made that the government has a hands off approach when it comes to pricing then people are argue that how is it during the election season we don't see oil marketing companies move to increase rates even though globally crude prices was surging during the time of the Karnataka elections and hence the question is raised on whether truly the market is deregulated and whether truly the government has no control over the pricing. The point on cartelisation which has been made by your own party colleague?
I don't know whom you are quoting.
For your information, Narendra Taneja is not part of my party spokesperson group. But in a broader issue, consciously government has categorically distanced itself with a policy reform and we are not going to day to day interfere about companies price mechanism.
Narendra Taneja is who I am quoting.