There will, however, be no change in the price of light diesel oil (LDO), which will continue to cost Rs 7,010 per kilolitre. The hike is a fallout of world prices of these products, which have been firming up for a while now. Oil industry experts say the increase is likely to continue in the days to come. The onset of winter in the west, which will increase demand for naphtha in industries, has also contributed to the upward price movement of these products.

Hence, as of Wednesday, naphtha will cost Rs 7,475/tonne, a good 10 per cent dearer than October levels when it was being quoted at Rs 6,830/tonne. This was practically the same for September also. In fact, when the first phase of deregulationkicked off on April 1, the price of naphtha was Rs 7,072/tonne, considerably lower than the preceding day (March 31 when the administered pricing mechanism (APM) was still intact) when it was being priced at Rs 7,440/tonne.

The same goes for FO, which now costs Rs 5,570/kilolitre, again an upward revision of 10 per cent from Rs 5,050/kl in the previous month. In September, the price of FO was Rs 4,700/kl. To give an indication of the impact of world prices, its on April 1 was Rs 4,800/kl, which was lower than the APM level of Rs 5,050/kl on March 31.

As for LSHS, the increase in November has been also around 10 per cent. It will now cost Rs 5,970/tonne, against Rs 5,410/tonne a month ago, and Rs 5,020/tonne in September. It is clear that this is the first time the real effect of an increase is being felt as it has been on a constant dip since the first phase of reforms began. On April 1, LSHS was down to Rs 5,070/tonne, from Rs 5,450/tonne barely 24 hours earlier, when the oil sector was still under thecontrol of APM.

"This is the hardcore reality, and it is time that the oil industry and users get used to it. As much as everyone rejoiced when world prices fell and the benefits passed on, there is also another side to the picture," experts say. This, they add, epitomises the "pleasure and pain" of deregulation, but eventually the spinoffs continue to be more than the momentary pinch.

And lest the era of APM could be missed for its seemingly tangible comfort levels, it ought to be remembered that none of the benefits of reduced world prices were passed on to the consumer. This is what the expert technical group, now referred to as the Nirmal Singh committee, strove to reiterate in its report.

"Efficiency enhancements associated with a move from APM to MDPM (market-determined pricing mechanism) are to the benefit of all concerned in the medium to long run. The indirect benefits through better utilisation of hydrocarbon deposits, higher oil security, a more efficient allocation of resources in thecountry and, hence, better employment opportunities and higher income will far outweigh the direct costs."

The report has gone on to add that the "transition period can also be used to dispel some of the misplaced fears and apprehensions that exist about pricing reform in hydrocarbons. At the end of the transition period, prices will be determined by the interplay of market forces, competition and enhanced efficiency. These will lead to downward pressure on retail selling prices at the end of the transition period."

As per the committee's recommendations, the petroleum sector will be completely deregulated on March 31, 2003. This will involve a complete change in the import and excise duty structures during the next five years. By the end of the period, the subsidy on superior kerosene oil will be transferred to the government's fiscal budget.