The Hindu Business Line : Fuel price hike not a matter of choice: Deora

JUSTIFYING HIKE: The Union Minister for Petroleum & Natural Gas, Mr Murli Deora (right), and the Secretary, Petroleum & Natural Gas, Mr M.S. Srinivasan, in Chennai on Saturday. — R. Ragu

Chennai , June 10

Fuel price hike is not just about protecting oil marketing companies but also ensuring development objectives as the availability of petroleum products underpins the growth of economy. Taxes on petroleum products, the world over, tended to be high as governments viewed it as a revenue mobilisation exercise.

Justifying the hike in petrol and diesel prices against the backdrop of steep increase in international crude prices, the Petroleum Minister, Mr Murli Deora, said that the "increase was not a matter of choice."

The oil marketing companies - Indian Oil Corporation, Hindustan Petroleum, Bharat Petroleum and IBP - faced an under-recovery of Rs 73,500 crore and their combined net-worth of Rs 41,500 crore would have been eroded. The situation had turned critical and could only be resolved by equitable distribution of the burden.

Mr Deora said the decision of States such as Tamil Nadu not to slash sales tax to partially mitigate the hike could also be attributed to the need to protect revenues to meet development expenditure. To Tamil Nadu, the recent hike in petrol and diesel cost brings in additional revenue of Rs 170 crore.

The Petroleum Secretary, Mr M.S. Srinivasan, said that with the growth of economy closely linked to fuel availability, the purchasing power of oil companies cannot be compromised. With the country dependent on imports - just a fourth of its requirement could be met from domestic production - the financial capacity of oil companies had to be protected.

In India petrol was subsidised up to 23 per cent, diesel (33 per cent), kerosene (62 per cent) and liquefied petroleum gas (30 per cent).

Mr Srinivasan said that the price of crude for India worked out to about $68 a barrel against $58 in September 2005. The hike today compensates for a price of $54.50 and $14 is still unmet.