The Hindu Business Line : Petroleum Minister seeks hike in fuel subsidy

Deliberations
This was the first meeting with the Prime Minister, where various aspects of the Rangarajan Committee report on the pricing and taxation of the petroleum products was discussed. Another meeting is expected soon to carry forward the discussions on these issues.

New Delhi , March 13

The Minister for Petroleum and Natural Gas, Mr Murli Deora, sought an increase in subsidies on fuel and disbursement of cess collected from the exploration companies to the oil marketing companies.

Speaking to newspersons after a meeting convened by the Prime Minister, Dr Manmohan Singh, to discuss the issues pertaining to the oil industry including recommendations of the Dr C. Rangarajan Committee, Mr Deora said that a transparent mechanism, such as the food and fertiliser subsidies, was required for the petroleum sector too.

The 2006-07 Budget has increased the subsidy for the petroleum sector to Rs 3,080 crore from the 2005-06 revised estimated of Rs 2,900 crore. "If there is a Rs 24,200-crore food subsidy and Rs 17,252.90-crore subsidy for fertilisers, why not the subsidy be raised for fuels through transparent budgetary mechanism," he said.

The Prime Minister had called a meeting of the Petroleum Minister, the Finance Minister, Mr P. Chidambaram, and Dr C. Rangarajan, to discuss the issues concerning the sector and difficulties being faced by the stakeholders.

OIL CESS

"Over Rs 60,000 crore has been collected under the Oil Industry Development Act cess in last 12 years. This should be shared with oil marketing companies," he said. The oil marketing companies are bleeding due to the impact of spiralling international crude prices and non-revision in oil product prices.

This was the first meeting with the Prime Minister, where various aspects of the Rangarajan Committee report on the pricing and taxation of the petroleum products was discussed.

Another meeting is expected soon to carry forward the discussions on these issues, he said.

No final decision has been taken on suggestions made by the Committee, he added.

PANEL RECOMMENDATIONS

Some of the recommendations of the Rangarajan Committee include allowing 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.

The panel has also called for the subsidy on kerosene to be restricted to below poverty line families only.

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.

Separately, the Petroleum Secretary, Mr M.S. Srinivasan, said the recent reduction in value-added tax rates announced by the Delhi Government will reduce the losses of oil public sector companies by Rs 15 to Rs 16 per cylinder, but said "there would be no change in prices for end-users."