The former petroleum secretary feels we gradually need to move towards a full or near-full neutralisation of global prices ...... Lola Nayar interviews Probir Sengupta Probir Sengupta, distinguished fellow at TERI and former petroleum secretary, spoke to Outlook the morning after the petro-products hike. Excerpts. Was the price hike inevitable and the quantum justified? It is well recognised that the price hike was inevitable and overdue considering that from mid-2007 the upward movement started from about $55-60 per barrel. In a country with about 75 per cent import dependency, you cannot insulate your oil sector totally from global changes. Further, prices have been increased in most countries including Sri Lanka, Bangladesh and Pakistan. There is no doubt that the extent may seem to be too high. That is because the increase has been deferred for quite some time. Is the hike too little and too late? In the short term, the problem relates to the oil companies' ability to buy crude oil. In the medium term, the health of the oil companies and their capacity to finance required investment is extremely important for our economic growth. The total investment in the hydrocarbon sector in the Eleventh plan is projected at Rs 2,50,000 crore as against Rs 1,50,000 crore in the Tenth plan. The bulk of this was through internal resources. The price increase should have taken place earlier and been gradual over the last 5-7 years. The earlier hikes have never neutralised the impact of global oil prices. Issuing oil bonds to neutralise the impact is not a sustainable proposition. The present price increase has possibly been higher than in the past. So, while one can debate as to whether it is too little or too late, what is important is acceptance of a process through which we gradually move towards a full or near-full neutralisation of global prices and a more rational pricing system than exists today. The process of gradual neutralisation of price has to continue, as there are no indications of prices coming down drastically in the near future. What is the way forward? We should now go for a much greater R&D for accelerating the use of renewable in our energy basket. There is also a greater need for more efficient use of energy as was done in countries like Japan, UK and France during the 1970s and 1980s. Thirdly, the functioning of the oil companies will have to be looked into at the macro level to ensure that their efficiency of functioning is also optimised.