May 11 poll results, then prepare for fuel hike

As reported by The Indian Express on March 20, when the need for a price hike was brought up informally at a Cabinet meeting, the directive was to ‘‘keep all price increases on hold until the elections were over’’.

With the poll moratorium coming to a close and crude oil spiking to near $70 a barrel, officials from both ministries agreed during the Friday meet on the emergent need to revise retail petro prices.

The last revisions in petrol and diesel prices are based on international crude prices of $60.52 and $56.35 a barrel, respectively. Since then, the price of Indian basket of crude oils touched $65.49 a barrel on April 18. Price corrections at the new high would require an increase of Rs 5.66 on a litre of petrol, Rs 7.64 on diesel, Rs 195.10 on LPG cylinder and Rs 14.29 a litre of kerosene.

However, to keep the price increase at Rs 3 a litre for both auto fuels, the oil ministry wants the customs duty on petrol and diesel to be lowered to 5 per cent while abolishing the excise duty on them. It also wants to do away with the 10 per cent customs duty on crude.

Another suggestion of the Petroleum Ministry is that the refineries be paid for kerosene and LPG on export parity — only FOB price without any freight — basis. The Finance Ministry is not very excited about the idea and has asked the Petroleum Ministry to submit specific proposals carved out of the recommendations by the Rangarajan Committee.

The committee had suggested increase in product prices with kerosene subsidy retained only for BPL families. Alternately, it suggested the burden be transferred to the government if prices were to remain unchanged.

amitav.ranjan@expressindia.com