Aiyar faces possible oil price hike

However, the new minister would find the job of hiking petro product prices a bit tough given the fact that the Left has already expressed their reservations against the hike. Sources in the ministry stated that the new government would likely try to balance the situation by implementing a hike below rupee one and offsetting the rest of the part by adjusting the tax structure.

Aiyar, who took charge of his ministry today, spent the first three hours trying to understand the situation arising from the hike in crude prices since January. The officials told the minister that the only way a hike could be avoided was by cutting duty on crude oil and products.

Aiyar did not commit, apparently wanting to discuss the politically unpopular issue with his cabinet colleagues particularly PM Manmohan Singh. When asked, he evaded a direct reply but said “We have to … consider all aspects before arriving at a decision.” Aiyar also has to decide on LPG and kerosene subsidy. The prices of these two have remained unchanged in the last two years and budgetary support has been reduced to one-third from April 2004, the under-recoveries on account of the two products is estimated at nearly Rs 14,000 crore in 2004-05. To sustain normal margins, price of LPG would have to be raised by Rs 42.61 per cylinder and Rs 1.49 per litre for kerosene.