The Hindu Business Line : PM calls meeting on Rangarajan panel report

The Prime Minister, Dr Manmohan Singh, has convened a meeting here tomorrow to discuss the issues pertaining to the oil industry including recommendations of the Dr C. Rangarajan Committee.

The Petroleum Minister, Mr Murli Deora, and the Finance Minister, Mr P. Chidambaram, are expected to be present at the meeting.

The Rangarajan Committee, set up by the Government to make recommendations on the pricing and taxation of the petroleum products, had proposed giving oil companies the freedom to fix the prices of petrol and diesel through the trade parity pricing mechanism rather than the existing import parity pricing.

It has also suggested reduction in customs duties on petrol and diesel from 10 per cent to 7.5 per cent and shifting excise duty from an ad valorem levy to a specific levy.

While acknowledging the need to subsidise kerosene, the panel has called for the subsidy to be restricted to below poverty line families only.

LPG SUBSIDY

It however saw no merit in subsidising LPG, which is mainly used by the above poverty line segment of society.

It has recommended an increase of Rs 75 a cylinder on cooking gas.

Beyond this one-time increase in LPG prices, the committee said, it is necessary to gradually increase the price of cooking gas so that the retail price adjusts completely to the market level, eliminating the subsidy altogether.

Dr Rangarajan had said that this set of recommendations relating to adjustments in prices of LPG and restricting subsidy on kerosene should be implemented as an integrated package as partial implementation will not yield sustainable results.

The Petroleum Minister had recently met the Finance Minister to discuss the problems faced by the oil sector. Some of the issues discussed were problems of bleeding oil public sector undertakings, oil bonds, exemptions for pipeline projects, infrastructure status, and oil cess. As per industry estimates, the gross under-recoveries suffered by the oil marketing companies during the current fiscal are close to Rs 35,000 crore.

The demands made by the Petroleum Ministry include extending Government guarantees to oil companies for sourcing of crude oil, granting of subsidies to the oil sector from the Budget on the lines of food and fertiliser subsidies, service tax exemption for exploration and production activities, and that working capital loans for oil marketing companies should be from Oil Industries Development Board (OIDB).

The OIDB loan is said be at a lower interest rate than the market loans.