The industry is in a limbo as duty changes recommended by the Nirmal Singh committee have not been incorporated yet. The most vital among these is reducing the import duty on crude from the present 27 per cent to 20 per cent. Likewise, the committee had suggested a five per cent duty on naphtha and lowering duties on a range of petro-products from aviation turbine fuel to liquefied petroleum gas.

Will the government announce all the changes in duty levels in the budget? The finance ministry may think twice about crude as it would mean a potential loss of revenue. The oil sector has been arguing, and quite logically, that this will be offset by an increase in consumption of petro-products. The question of continuing subsidies on kerosene and LPG remains and decisions on these are likely to be governed more bypolitical rather than economic compulsions.

The oil PSUs have their own set of worries apart from mere duty changes. Their "B" site retail outlets are attractive takeover targets for the private sector and recent reports indicate that the process of wooing these dealers has already begun. The other threat comes in the form of poaching PSU staff who are lured by the phenomenal salaries offered by private companies. There is little PSU chiefs can do, unless bold steps are taken to make the public sector environment more rewarding. The other area of concern is that while the oil sector gears up for deregulation, foreign partners are backing out of refinery projects. The Oman Oil Company withdrew from the west coast project which was to have been jointly implemented with the Hindustan Petroleum Corporation. Saudi Aramco is having second thoughts about the Punjab refinery with HPCL as also Shell with Bharat Petroleum Corporation. Petronas is not too keen on being a joint promoter with IOC for the Nagapattinamrefinery. All these companies have realised that margins in the refining sector are still not attractive enough to warrant an investment.

A practical solution to this could be a marriage between the local oil PSUs instead of seeking a global partner. Hence, even if Shell says no to the Bina project, BPCL could still go ahead with say IOC as a partner. The same could apply to HPCL for its projects. Alliances are crucial for growth in a deregulated scenario. But for such innovative solutions to be effective, total autonomy for the oil PSUs must be ensured.