Government Likely To Deregulate Fuel Prices Further - Opening Market For Biofuels?

Online, June 30, 2010 (Newswire.com) - kb. Delhi. Now that the government's practice of regulating fuel prices has come to an end, private oil companies and alternative fuels get their big chance. A larger variety of fuels and stiff competition in the market have long been overdue.

So far the Government kept fuel prices at a constantly low rate, even if the market price was higher. Following a regulated price mechanism, the Government used subsidies to compensate for the difference.

Recognising the need to align fuel prices to the market rate, the Government has now partially enforced the suggestions of the Kirit Parekh Committee. Parikh regarded the former pricing policy as "not sustainable" and did not approve its perpetuation. Since last Friday, petrol prices have been deregulated and diesel prices are likely to take the same direction. With an increase of 3.5 Rs. per litre of petrol, the subsidy burden has been lifted from the Government's shoulders.

However, the fuel market is not fully decontrolled yet, since diesel prices are still awaiting to be aligned to the world market price. "Even though the government will move slowly in the case of diesel, the essential decision has been taken in principle that the price would be market driven, would be determined by the cost of imports both at the refinery level and at the retail level," Mr. Kirit Parikh said in an interview.

Those how fear that higher prices might disrupt the smooth functioning of the economy can put their minds at rest. Higher fuel prices do not ultimately jeopardize healthy economic prices. The case is quite the contrary: The huge revenue losses that the OMCs had to incur will probably be reversed into a large profit margin, given the dimensions the Indian oil market takes up. Private players like Essar Oil will eventually re-gain ground on the market. As soon as smaller companies are entering the stage, the door will be opened for a broad range of fuels, including biofuels, and fuel saving technologies, of which the country is in dire need.

Even though the Government has taken a step forward and set a prime example, it still falls short of a concession much required: Biofuels are a cheaper and more viable option to non-renewable fossil fuels. So far the level of biofuel blending lies at five per cent. Mandating a higher proportion of biofuel in blends - even vehicles solely running on biodiesel - is a target easily with reach. To procure an amount of biofuel to fulfil the nation's demand and to build up a dependable fuel supply chain should be the Government's priorities.

Someone who has already broken this ground is Earth-100, a company that offers a convenient "green solution" for eco-friendly transportation. Not only does Earth-100 provide cars that run on 100 per cent biofuel, they also organize management services for covering the entire operations chain for its customers. This includes the supply and dispensing of fuel, maintaining and servicing the vehicles and also tracking car performance for its customers. The vehicles Earth-100 supplies are modified so that they can run on 100 per cent biofuel and can replace a conventional fuel-operated car fleet while having the ability to run on normal diesel (if required) from the same tank.
"Finding an on-the-ground solution was - in our eyes - the only sensible thing to do. A financial solution like trading carbon credits didn't really make the difference we wanted to make", says Akshat Rathee. "In order to reduce one's carbon footprint our way one has to set one's heart on it. Corporates who have enough concern for the environment will go for a practical solution like Earth-100's biofuel cars."
Since 2008 Earth-100 has been setting up a dependable supply chain and will soon start operating green car fleets in NCR.

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