The Hindu Business Line : Aiyar, Chidambaram to discuss revision of oil product prices

THE Petroleum Minister, Mr Mani Shankar Aiyar, and the Finance Minister, Mr P. Chidambaram, are set to meet on Monday to discuss issues pertaining to revision in oil product prices including `changes in duty structure, if any'.

"I have asked time from the Finance Minister to discuss the issues," the Petroleum Minister said.

The oil marketing companies have been pressing the Government to make an upward revision in the oil product prices to keep pace with the rising international crude prices.

The companies have been seeking a hike of Rs 5.18 a litre for diesel and Rs 4.70 for petrol. The prices were last revised in November last year.

Further, the increase in excise duty in Budget for 2005-06, cess for road development , coupled with the increase in raw material cost has necessitated the move. The oil firms have neither passed on the rise in crude prices nor the duty changes to the consumer.

In fact, the Standing Committee on Petroleum & Natural Gas on Demand for Grants (2005-06) for the Petroleum Ministry in its report has recommended that excise duties on petroleum products should be so structured that the additional revenue of Rs 3,000 crore is neutralised. This would also help in adhering to the Budget Statement of revenue neutrality in letter and spirit, the report said.

Certain changes have been effected in the tax levies on crude oil and petroleum products from March 1, 2005 by the General Budget proposals (2005-06). Though these changes were projected to be revenue neutral by the Ministry of Finance, the Committee was astonished to see that it adds an incremental revenue of Rs 3,000 crore per annum to Central coffers, the report said adding that "thus, whatever has been given by one hand has been taken away by the other."

To be more precise, the effect of customs duty cut has not only been neutralised but also supplemented by the changes made in excise levies, the report said.

Apprehending that the added burden on excise front would also be passed on to customer in the name of exorbitant rise in international prices of these products, the committee expressed its concern about the excise duty hike on the most commonly used petroleum products, especially at a time when the international prices of these products have gone all-time high.

Further, any price reform in the oil sector should keep the customer interest in mind and attempt at rationalising the duty structure or adjusting the duty in such a way that the cascading effect of the international petroleum prices does not weigh down the customer, the report stated.

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