The exact difference in price for these two products is yet to be ascertained though sources say it could be in the range of Rs 500 per tonne for fuel oil and "marginal" for naphtha.

World prices have been on the rise during the last two months and experts reckon it could see a further upward curve in the months to come.

The buyers for these products are the Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation. However, it remains to be seen if they pass on the increase in price to the end-user. Present indications are that the big three may not consider such a move till the budget is announced.

Sources inthe ministry of petroleum and natural gas said the present increase would largely benefit the stand-alone refining companies. As regards the marketing companies, they would need to sort out among themselves if they need to revise prices.

Oil industry observers feel that IOC, HPCL and HPCL can "afford to subsidise a price increase" for a month till the budget when announcements on revised duty levels for crude and other petro-products are expected to be made. These will be in line with the Nirmal Singh committee's recommendations on oil reforms and are absolutely essential for the first phase of deregulation to pass off smoothly. The petroleum ministry had intimated to the oil companies that effective April 1, it would be necessary for them, either individually or collectively, to inform the ministry of any price revisions at least one week. The companies had to also ensure that there were "no sudden jerks" in price variation and that their customers were also suitably educated and informed about the needfor change and direction of the proposed changes.

IOC, HPCL, BPCL and the stand alone marketing company, IBP, have resolved to join hands and cooperate with each other during the first year of deregulation of the petroleum sector which lasts till March 31, 1999. The understanding reached between the four will ensure that there is no poaching of business during the period and that prices will be fixed only after a consensus is reached by them. Towards this effort, the Oil Coordination Committee proposes to draw up an industry logistics plan (ILP) for these decontrolled products which are naphtha, LSHS (low sulphur heavy stock), bitumen, paraffin wax and FO (furnace oil).

The ILP would work in the same pattern as the existing supply plan mechanism (SPM) for the controlled products with the only difference being that movements planned through the ILP process would have no adverse implications on the oil pool account.

The petroleum ministry has also indicated that under/over-recoveries in freight etc wouldhave to be adjusted among the PSU companies in a mutually agreed manner. the decision to join hands has been taken as the reforms period could see violent price fluctuations and individual market shares being affected.