The Hindu Business Line : `Inadequacies in petro price mechanism will hurt economy'

IF distortions and inadequacies in the petroleum price mechanism and its existing tax structure are not corrected, the resultant chaos will hurt the economy in the long run, says a paper brought out by the Associated Chambers of Commerce and Industry of India (Assocham) on `Oil sector - a round-up: Does the policy framework of India ensure oil security?'

Releasing the paper, the Assocham President, Mr Mahendra K. Sanghi, said that, when the petroleum sector was de-regulated in 1997, it was decided that the subsidy in domestic kerosene for supply to the public distribution system would be 33 per cent, and 15 per cent for domestic LPG.

Currently, the estimated subsidy for kerosene is Rs 11.45 per litre, which is around 127 per cent; and for a LPG cylinder, it is at Rs 92, about 32.67 per cent.

The under-recoveries by oil marketing companies have been estimated at Rs 15,000 crore for the current fiscal up to mid-August.

The chamber recommends that the domestic petroleum products before taxes should, as a rule, be set at the international level and the Government should not take the responsibility of shielding the private sector from changes in oil prices.

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