End state control on petro prices

BS Reporter / New Delhi July 3, 2009, 0:54 IST

Leading to inefficient, unsustainable use, it warns.

On the day a petrol and diesel price hike became effective, the Economic Survey said prices of petrol and diesel should be removed from state control, so that buyers learn to economise on the use of refinery products.

For cooking fuels, it suggests limiting the number of subsidised LPG cylinders available in a year to every household to six to eight and phasing out of the kerosene subsidy through use of solar lanterns and cookers by every household that does not have electricity and LPG connections.
 

BREACING UP

* Create financial buffer when crude prices rise above $80 a barrel

* Sell old fields to private companies n Limit LPG subsidy to 6-8 cylinders a year per household

The survey suggestions are in contrast to the government stand on kerosene and LPG subsidy. Just about an hour after the survey document was placed in the Lok Sabha, petroleum minister Murli Deora, in his reply to a discussion on the petroleum price hike, said, “To ensure uninterrupted supply of two products (kerosene and LPG) at subsidised prices, the government is prepared to bear the projected subsidy burden of over Rs 30,000 crore in 2009-10.”

In a rising price scenario abroad, the survey said inefficient use of petroleum products due to low price here was a “form of foreign taxation on national income”, since the country imports more than 70 per cent of its crude oil requirement. It is particularly worrisome since the production of crude oil in the country declined in 2008-09 to 33.5 million tonnes from 34.1 mt in 2007-08.

While suggesting that old fields be opened to the private sector for development, the survey also notes that investment commitment under the new exploration and licensing policy was about $10 billion as on April 1, though the actual expenditure was $4.7 billion. In addition, $5.2 billion in investment has been made on development of discoveries.