Pranab may tinker with levies to avoid fuel price hike

Richa Mishra K.R. Srivats New Delhi | Updated on March 07, 2011

Mr Pranab Mukherjee, Union Finance Minister.


Expectations are running high that the Finance Minster, Mr Pranab Mukherjee, will cushion consumers from the impact of the soaring international crude oil prices by reducing duties on petroleum products and crude oil.

Some levies were imposed in the 2010-11 Budget.

The duty rejig will also help in bringing down the revenue loss incurred by public sector oil marketing companies (OMCs) for selling the fuel below the market-determined price.

Currently on diesel retail price, the duty (Centre plus State) component is almost 24 per cent, while in the case of petrol it is 44 per cent.

In the Budget for 2010-11, the Customs duty on crude was hiked to five per cent from zero and correspondingly on petrol and diesel to 7.5 per cent from 2.5 per cent.

In last year’s Budget, the excise duty on petrol and diesel was increased by Re 1 a litre each taking them to Rs 14.35 and Rs 4.60 a litre, respectively. The Customs duty on crude oil was reduced to zero per cent from five per cent when oil prices rose steadily in 2008. However, this was reversed in last year’s Budget.

Now that crude oil prices are once again hovering over $100 a barrel, it is widely expected that the duties will be brought down.

At present, the retail selling prices of diesel, PDS kerosene and domestic LPG are not being maintained in line with the international oil prices, as the OMCs sell these products at a Government controlled price.

In June 2010, the Government decided to make petrol price market determined both at refinery gate and at the retail level.

In other words, the OMCs were given freedom to decide the petrol price. However, an informal control of the Government on petrol prices still exists.

If the Economic Survey 2010-11 is any indicator, the Government is committed to ensuring availability of cooking fuel to the common man at an affordable price.

The Survey also mentioned that the increase in diesel price will be staggered over time to minimise the overall impact on the poor and vulnerable.

Further, it says that in case of a spurt and volatility in international oil prices, the Government will suitably intervene in the pricing of petrol and diesel.

The Survey also states that the current high prices of aviation fuel could affect the airline sector.

Published on February 27, 2011

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