SEPT 16: Placed in a tight spot due to spiralling world oil prices, the Centre is debating raising rates of petroleum products between 10 and 20 per cent of their import price.The Petroleum Ministry is working out various options to tackle the huge deficit in oil pool account which is likely to touch a high of Rs 9,000 crore by the end of this month and was increasing at a rate of Rs 900 crore per month.The proposed hike in prices of LPG are expected to be in the region of Rs 30-40 per cylinder, if the 10 per cent hike formula is adopted. In the case of diesel, the increase is expected to be around Rs 3 to Rs 4 per litre and kerosene by Rs one per litre.The final decision would be taken after the Prime Minister Atal Behari Vajpayee returns from his US visit, and Petroleum Minister Ram Naik from Indonesia where he is attending the Asian petro meet. Naik has already discussed various options with consultative committee of his Ministry and Finance Ministry officials, but a decision is yet to be reached.According to reliable sources in the Petroleum Ministry, as aviation turbine fuel and petrol are already overpriced, they are likely to escape the impending hike.Prices of LPG cylinder should be hiked by Rs 100, diesel by Rs five a litre and kerosene at Rs 2 a litre, if the Centre had to implement its policy of phasing out subsidy on petro-products in toto. Political considerations, however, do not allow it to pass on the entire burden to consumers.The Petroleum Ministry wants a reduction in excise and custom duties so that the petroleum prices come down, enabling it to raise them by 20 per cent. But, the Finance Ministry, which receives levies generated through excise and customs, is learnt to be opposed to the idea. In that case, the Petroleum Ministry won't be able to raise the prices by only 10 per cent.The Petroleum Ministry had issued Petro Bonds in March 1998 to mop up Rs 13,000 crore from the market, thereby bringing oil pool deficit to Rs 5,000 crore. The Centre had decided to gradually reduce subsidies on all petroleum products so as to bring the deficit down to zero.But it could not keep its deadlines and recent hike in international prices resulted in a Rs 9,000 crore deficit in oil pool account. The Petroleum Ministry may have to float Petro Bonds again if the Finance Ministry doesn't allow it to rationalise the duty structure.The Centre formulated the Comprehensive Pricing Policy (CPP) in September 1997 to reduce subsidies in a phased manner by year 2002. As per an extraordinary gazette notification in November 1997, subsidy on LPG had to be reduced to only 15 per cent of Import Parity Price (IPP) by 2000-2001. The IPP of LPG per cylinder was Rs 380 including excise and custom duties and it was being subsidised by Rs 180 per cylinder.Similarly, subsidy on kerosene had to be brought down to 33 per cent of IPP (Rs 11) by the beginning of 2000 and subsidy on diesel had to be entirely wiped out. So, the diesel being sold at Rs 14 per litre could go up to Rs 19 per litre.But with elections to five State Assemblies - including crucial West Bengal - to be held within next six months, NDA Government at the Centre is unlikely to go for the steep hike proposed by the CPP.
