Financial Daily from THE HINDU group of publications
Sunday, Mar 17, 2002
Government - Policy
Industry & Economy - Petroleum
LPG price hike cut by half
Mr Ram Naik
NEW DELHI, March 16
BOWING to pressure from its own allies and from Opposition, the Government on Saturday rolled back by half the hike of Rs 40 per LPG cylinder price it had proposed in the Budget 2002-03.
The reduction in LPG price by Rs 20 per cylinder would come into effect from midnight of March 16. However, the hike in the price of kerosene under public distribution system by about Rs 1.50 per litre announced in the Budget remains intact.
Making a suo motu statement in the Lok Sabha, the Union Minister of Petroleum and Natural Gas, Mr Ram Naik, said that following a revision in LPG prices in the Budget by about Rs 40 per cylinder, the Prime Minister received representations from various sections of society including political parties and consumer groups.
They had pleaded with the Government for reducing the burden on consumers due to the recent increase in prices of domestic LPG.
After considering all aspects of the matter, the Government has now decided to reduce the retail sale price of domestic LPG by about Rs 20 per cylinder. This would benefit, Mr Naik said, over 60.3 million urban and rural households using LPG for cooking.
The subsidy burden due to this price reduction would increase by around Rs 700 crore during 2002-03 to the exchequer. It might be noted that the Prime Minister, Mr Atal Bihari Vajpayee, held discussions with the Finance and Petroleum Ministers on Friday to ascertain the implications of the proposed cut in the enhanced prices of LPG.
Mr Naik said that the oil prices over last few weeks have been showing an uptrend. The price of Brent crude oil, which was around $20 per barrel in the last week of February, is now ruling over $23 per barrel. The prices of petroleum products in the international market have also moved upwards over past three weeks.
Mr Naik said that despite the increase in the oil prices in the global crude oil market, the Government has resolved to reduce the prices with a view to lessen the burden cast on the consumers using LPG for cooking.
By shaving 50 per cent of the price hike proposed in the Budget in LPG prices, the petroleum subsidy consisting of subsidies for LPG, PDS kerosene, freight subsidy for far-flung areas and other related compensation amounting to Rs 6,495 crore, as provided in the Expenditure Budget 2002-03, would get escalated by Rs 700 crore to touch Rs 7,195 crore.
However, as the Petroleum Ministry has reckoned, subsidy on LPG and kerosene through PDS for fiscal 2002-03 at Rs 4,495.7 crore, today's cut in LPG cylinder price by Rs 20 involving a subsidy of Rs 700 crore in a year will push the subsidy cost on this count to Rs 5,195 crore. Since the Oil Pool Account would be dismantled on April 1, and the outstanding balance liquidated by issue of oil bonds to the oil companies concerned, the petroleum subsidy would be borne by the consolidated fund from April 1.
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