With the Election Commissions notification of mid-April elections imminent could be as early as Saturday the UPA moved on a proposal to cut diesel price by Rs 2,even fixed an emergency meeting of the Cabinet Committee on Political Affairs for Friday. But late tonight,it decided against the cut after acting Finance Minister Pranab Mukherjee raised objections.
Earlier,Congress sources said,Petroleum Minister Murli Deora met UPA chairperson Sonia Gandhi to discuss the proposed cut before the Model Code of Conduct comes into effect.
In fact,Deoras Ministry worked overtime to submit a proposal that diesel price be cut by Rs 2 as state-run oil marketing companies (OMCs) were earning Rs 4.44 a litre on it. No change was recommended in petrol where the OMCs gain mere 3 paise per litre,or in kerosene where the loss is Rs 11.25 a litre and LPG where the loss is Rs 74.53 per cylinder.
However,at a late-night meeting at Sonias residence,Mukherjee reiterated his opposition to the price cut saying that squeezing OMCs margins would mean more payout by the Finance Ministry as oil bonds. The three firms are earning Rs 36 crore per day on diesel sales,enough to negate the daily loss of Rs 24 crore on kerosene and Rs 9 crore on LPG. Mukherjee provided Rs 75,942 crore of oil bonds in 2008-09 outside the Budget and Rs 2876.43 crore as direct subsidy for kerosene and LPG in the Budget to help OMCs tide over under-recoveries.
These,along with food and fertilizer subsidy,put his dole payout at Rs 218,294 crore,4 per cent of GDP,which Mukherjee hopes to restrain at 1.7 per cent of the GDP in fiscal 2009-10.