Ministry for steep petro hike, Left puts its foot down

Petroleum Minister Murli Deora agreed that there was a need to rationalise the tax structure in the sector but said a price hike was necessary for which he would meet Finance Minister P Chidambaram tomorrow.

The Left said the Government was using the oil sector as a ‘‘milch cow” to get revenues while oil PSUs were suffering losses and the consumers would be forced to bear the pain of a petro price increase.

While making the presentation, Petroleum Secretary M S Srinivasan explained the reasons for a price hike, among them being the huge under-recoveries by the oil PSUs (Rs 45,400 crore in 2005-06, which would go up to Rs 73,500 crore in 2006-07) and the recommendations of the Rangarajan Committee. He said the required increase for petrol was Rs 9.33, for diesel Rs 10.43, for domestic kerosene Rs 17.16 and for LPG Rs 114.45 per cylinder.

But neither Deora nor ministry officials refuted the Left’s arguments that under-recoveries by the PSUs could not be regarded as losses. Further, the Finance Ministry had not removed levies on oil following the dismantling of the APM and these were adding to the burden. The Left leaders also charged that private refineries were being favoured through the pricing mechanism.

When Ministry officials argued that without a price increase, it would be impossible to absorb the under-recoveries of Rs 73,500 crore, the Left leaders countered that with Central Government revenues of Rs 77,800 crore from the oil sector (2005-06), this could be absorbed.

They also said that while crude prices had gone up from $32 a barrel to over $70 a barrel since the UPA came to power, the Government had earned revenues through ad valorem.

However, Left leaders seemed reconciled to a price rise. ‘‘We want the deficit from the rise in international crude prices to be bridged. But, we want the government to find out the ways in which this can be done other than by raising prices,’’ CPI(M)’s general secretary Sitaram Yechury said.