Govt seeks cushion for oil price hike
Revenue from petrol surcharge may come in handy
| The surcharge was imposed in the 2002-03 Budget presumably to provide for subsidy on cooking gas and kerosene since the cross-subsidy mechanism in the petroleum sector through oil pool account was abolished with the dismantling of administered pricing mechanism that year. |
| Though the subsidy on cooking gas and kerosene has been gradually reduced over the past two years and now stands reduced to one-third of that prevailing in 2002-03, there has been no change in the surcharge. |
| The finance ministry hopes to generate Rs 6,500 crore this fiscal from the surcharge. The surcharge had yielded Rs 6,200 crore during 2003-04. |
| The petroleum ministry is of the view that in case a correction is carried out in the surcharge in view of the reduced subsidy, there may not be any need for a price-hike. |
| Petrol and diesel prices were last revised by public sector oil marketing firms on December 31-January 1 and the international prices of oil have been steadily going up after that. Brent, which was hovering around $31 a barrel in the international market on January 1, touched a 13-year high this month and has shot up to around $37.30 a barrel. |
| Public sector oil firms have asked the petroleum ministry to raise petrol prices by Rs 3 a litre and diesel prices by Rs 5 a litre in step with the rise in international crude oil prices. |
| Added to this is the 20 paise a litre "special purpose cess" that the government is planning to levy on petrol and diesel for financing strategic oil reserves in the country. |
| The combination of the high international prices of crude and the "special purpose cess" will imply that the oil companies will be looking at a hike of around Rs 3.50 a litre in the case of petrol and Rs 5.50 a litre for diesel. |
| In case the retail prices are not "subsidised" by the government, or the oil companies refuse to take a hit on their finances, this will be a heavy burden on the consumer, which any new government may not like to impose immediately after assuming power. |
| Petroleum ministry officials say in case the finance ministry refuses to cushion the price-hike, the government may have to ask the oil companies to stagger the increase over a couple of months so as not to hit the consumer hard. |