Petro prices to be hiked after PM’s return

"We expected them to increase production by 10-12 lakh barrels a day to keep crude prices within the band of $22-28 a barrel in line with OPEC’s decision in March… their decision is welcome but they should have kept in mind the anticipated increase in consumption owing to increase in winter demand in the western countries," Naik said.

Stating that the issue had been discussed with the Finance Ministry, Naik said "we have to tackle the situation with a mixture of three options – adjustment of taxes and duties, issue bonds to control oil pool deficit and increase prices."

Naik said that India’s import bill would be over Rs 70,000 crore during the current financial year, up from Rs 57,000 crore in the last financial year. India is expected to import about 78 million tonnes of crude and over three million tonnes of product during the current fiscal, with ministry sources projecting foreign exchange outgo of $17-18 billion in 2000-01 as against about $12.5 billion in 1999-2000.

Stating that oil pool deficit had soared to Rs 9,000 crore by September 1 from about Rs 6,000 crore at the beginning of the current financial year, Naik said at the current price level, diesel was carrying a subsidy of Rs 3 a litre while cooking gas was subsidised by Rs 160 per cylinder.

Asked if the government would eliminate subsidy on diesel in line with earlier cabinet decision to accord import parity to this fuel in the domestic market, the Minister said "the decision was taken in 1997 but earlier governments did not implement the same…. We will take appropriate decision."

One of the proposal given to Finance Ministry was that it should return about Rs 4,000-5,000 crore it had taken from the oil pool account a decade back, Naik said but declined to comment if Finance Minister Yashwant Sinha was agreeing to cut duties.

Asked if government would stick to the target of dismantling Administered Pricing Mechanism as per schedule of April 2002, Naik said "appropriate decision will be taken at the due time… We still have two more years but our current thinking is to overcome the present situation."

Referring to his earlier statement, he said that any decision on reviewing the petro-product prices would be taken only after the outcome of OPEC meeting was known. "Now, the wait is over and we will now see over the next 8-10 days as to how the market is responding to OPEC decision. By then, Prime Minister and Finance Minister will also return and then we shall take any decision," he added.

Replying to a question Naik pointed out that kerosene was subsidised upto Rs six a litre, while aviation turbine fuel was carrying a marginal subsidy (about Rs 0.19 per litre). Asked about the factors to be taken into consideration for any price hike, he said the government would take into account the average international prices, the past trends and an element of anticipation for arriving at any decision.

Ministry sources said that finance ministry had taken an average price of $20 per barrel for the purpose of determining excise and levies to collect an estimated Rs 25,000 crore for current fiscal while pointing out at the current price level the exchequer would get above Rs 37,000 crore.

The Petroleum Minister has already approached finance ministry with a proposal that surplus revenue should be transferred back to the oil ministry to contain pool deficit which, if left unchecked, would shoot up to Rs 15,000 crore at the prevailing price level, sources added.