STOCKS & COMMODITIES

0655 2 July 2009 New Delhi This is a manifest case of insider trading - over the last week, despite crude oil prices holding firm at 70 dollars, the shares of oil marketing companies have been gaining strength. In yesterday's trading session, refiner BPCL led the list of Nifty gainers, with a 6 per cent surge in price, to Rs. 455. Shortly after markets closed, it became clear why the stock had seen such hectic buying interest: firstly, the government announced a hike in the price of petrol and diesel; secondly, it clarified that it would make good losses the refiners are making on under-priced cooking gas and kerosene. Clearly, news of the impending policy announcement had leaked, and those inside the ministries of petroleum and finance, or those connected to them, decided to make a quick buck on the side. In a country where so much commercial policy is shaped by government diktat, people with privileged access to decision-making need to be monitored and prevented from capitalising on their positions. On the policy front, yesterday's move throws up a few interesting issues: - firstly, it continues the trend of Mr. P Chidambaram's Finance Ministry to make major revenue announcements before the annual budget, due to be presented next Monday. - secondly, by refusing to touch the hugely subsidised prices of cooking fuels, it underlines the sense that the Congress government is going to present a highly populist set of budget proposals. Funding these is another issue. - by aligning the price of petrol and diesel with their economic cost, it brings the government-controlled oil refiners one step closer to deregulation; this should encourage the capital markets to price their shares more generously.