LPG, kerosene subsidy cuts to be reviewed

NEW DELHI, March 23: Petroleum minister V Ramamurthy today announced that the government would review the United Front's (UF) commitment to ...

NEW DELHI, March 23: Petroleum minister V Ramamurthy today announced that the government would review the United Front’s (UF) commitment to reducing subsidies on LPG to around a third, over a period of three years.

Similarly, the decision to reduce kerosene subsidies by roughly the same proportion is also likely to be reviewed — in its November 21 notification, the government had announced a time-table giving details of each year’s subsidy cuts. Currently, the subsidy on each LPG cylinder is Rs 40 — it was Rs 77 in September, when oil prices were higher. Subsidies on LPG were to be cut by 33 per cent in 1998-99 and 15 per cent the year after. Kerosene subsidies were to be cut by 30 per cent in 1998-99, and 20 per cent the year after.

Apart from sending shockwaves across petroleum circles, Ramamurthy’s announcement signals the BJP-led coalitions’ problems on the issue of cutting subsidies — the party and its allies, for example, have already announced their commitment to continue with farmsubsidies.

Subsidies on kerosene are currently around Rs 6,000 crore, while those on LPG are around Rs 1,400 crore. So, in the next financial year (1988-98), the subsidy burden was to have been reduced by around Rs 2,500 crore. With the prices of major petroleum products increasingly being linked to import prices, this means that the major part of this burden will continue to be borne by petrol. In other words, petrol prices will continue to remain at nearly double the international ones Parrying questions on subsidies Ramamurthy joked: "You’d appreciate that subsidies cannot be cut during my tenure!"

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