APPARENTLY it may appear that the market forces prevailed on the government to take the first step towards reforming the oil sector by deregulating petro-product prices.

But the fact remains that massive subsidy bill and increasing budgetary deficit forced the government to resort to this action. No doubt it will boost competitiveness in large oil economy but one ought not to ignore the fact that it would have a far reaching impact on the economy of the country. The bourgeoning middle class with strong purchasing power may withstand the increase in the prices of petrol, diesel and also of LPG, but tweaking the price of subsidised kerosene will make the lives of the common people, particularly the poor miserable. With global crude oil prices hardening, the empowered group of ministers (EGoM) had no option but to recommend for raising the prices of petrol and diesel, reducing the subsidy on cooking gas but the government should be cautious that merely market compulsions should not be the decisive factor. Any reform should have a humane face and it is more relevant for a country like India where 37 per cent of the people are still living below poverty line. The government should take care of the interest of the oil companies but it must protect the common people. Fixing the price of the oil has been a vexed issue and the government should ensure that its move is not perceived as simply market driven and exploited by any oil company for its gains and earning more profit. One aspect which needs urgent government attention is the accumulation of vast under-recoveries of the oil companies. The Kirti Parikh committee might have recommended for complete decontrol of petrol prices with immediate effect, followed by diesel, partial increase of PDS kerosene and also the LPG. But the fact is the recommendation is not viable in the Indian context. The government should look into bringing about a structural change in the set up of the oil companies and their functioning. The government should ensure that this increase in the prices is properly used by the Oil Marketing Companies. With India aspiring to emerge as a leading global economic power, reforms in the downstream oil and gas sector is imperative but it should be of holistic nature. It is incumbent upon the government to ensure that the companies do not resort to whimsical pricing of the products on the plea of giving a shape to reforms.