Fuel rates are hiked, cushion is in place too

The government today finally decided to hike the prices of petrol, diesel and cooking gas (LPG) while leaving the price of kerosene unchange...

The government today finally decided to hike the prices of petrol, diesel and cooking gas (LPG) while leaving the price of kerosene unchanged. In an effort to keep the hike lower than required—given the rise in international crude prices—the government announced reductions in the excise duties of petro products.

While prices of petrol and diesel were hiked, with effect from Tuesday midnight, by Rs 2 per litre and Rs 1 per litre respectively, LPG was hiked by Rs 20 a cylinder. The government slashed excise duty on petrol by four per cent to 26 per cent, diesel from 14 per cent to 11 per cent and on LPG from 16 to 8 per cent.

Petroleum minister Mani Shankar Aiyar said that the increase was necessitated due to spurt in international oil prices which has put an additional burden of Rs 18,000 crore a year. ‘‘On the principle of equitable burden-sharing, the burden has to be shared by all the stakeholders ie government, the oil marketing companies and the consumers, with special measures being taken in favour of vulnerable sections of the society and vulnerable segments of the economy,’’ Aiyar said.

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Stating that the subsidy on LPG and kerosene would continue in the Budget for 2004-05, to be presented on July 8, Aiyar said going by the Cabinet decision of the earlier government, which was taken a year back, the subsidy needs to be phased over three years. ‘‘Going by that, we still have two years to continue the subsidy. However, the finance ministry would decide on that,’’ he said.

Asked about the possibility of a rollback on the LPG price hike—the Left has already expressed reservations—Aiyar said: ‘‘We are not a roll back goverment.’’

Aiyar said the Rs 2-hike in petrol was much lower than market indicated price hike of Rs 3.67-Rs 4.91 a litre while in the case of diesel, the Re 1-hike was against the requisite hike of Rs 1.67-Rs 2.35 per litre.

In the case of LPG, the market-indicated price increase was Rs 133 a cylinder but the actual hike was just Rs 20.

Kerosene was spared the hike although the market- indicated hike was Rs 4.43 a litre, he said.

	‘Reformist’ BJP shouts: anti-people

			• BJP: “Anti-people,’’ will be “heavy burden” on farmers during sowing and ploughing. • CPM: Hike is “minimum” which won’t burden the common people “much”. The party, however, expressed reservations on the LPG price hike. • Congress: UPA “compelled” to hike prices as NDA kept them on hold for six months in view of elections. Story continues below this ad

When asked whether the government was going back to the earlier regulated regime of pricing of petro products, Aiyar said that the previous government had in actual terms never done away with control on pricing. Criticising the previous government for keeping the prices of kerosene and LPG frozen despite “proclaimed” dismantling of administered pricing mechanism in July 2002, Aiyar said auto fuel prices were also not increased since January this year.

He added that the government was working on allowing more freedom to the oil companies to adjust price within “socially acceptable limits” thus indicating flexibility to the oil companies to determine prices within a specified price band.

He also added that the government was working on targeted subsidies and strengthening the Navaratna oil PSUs.

Oil marketing companies greeted the annoucement of the hike. Both M S Ramachandran, CMD of IOC and M B Lal, CMD of HPCL called it a ‘‘step in the right direction.’’

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Ramachandran said that oil marketing companies would still lose 15 paise per litre on diesel and more on petrol not to mention LPG and kerosene. Going by estimates of oil marketing companies, who put their loss at around Rs 5,000 crore in April to June 15, 2004, the under-recoveries would be down by 50 per cent with the present package.

Aiyar also said that besides autonomy to oil companies to fix price within price bands, they would be allowed to raise resources from the capital market.