Ministry Rift Over Oil Price Hike Comes To Fore Again

Sharp differences have once again emerged between the finance and petroleum ministries over the issue of oil price hike. While the finance ministry wants petroleum prices to be increased without delay, the petroleum ministry wants duties and taxes be brought down considerably to contain the increasing oil pool deficit. The tiff has now become an annual feature with both the ministries taking their known stands whenever there is talk of revising domestic prices of petroleum products. Though the two ministries have not so far had official-level talks on the issue, they have let known their positions unofficially. Officials in the finance ministry have been arguing that like the Opec member-countries, revenue collections of the finance ministry had been adversely affected during the period oil prices were ruling low. Since at that time it did not seek relief from any ministry, the petroleum ministry should not grudge the extra funds it has been raking in now when the prices are booming. Petroleum ministry, on the other hand, says that while the finance ministry should ensure that it gets the revenue envisaged in the Budget, the tax structure should be amended in a manner that it does not get the extra revenue at the cost of the domestic consumer. In fact, this view of the ministry was shared by petroleum minister Ram Naik with members of the Parliamentary Consultative Committee on Thursday when he said that "it may not be possible for the government to keep the prices unchanged in view of the sharp increases in the international market unless the duties or taxes on petroleum products are brought down." He also asked state governments also to bring down sales tax on petroleum products lContinued on Page 8 which was as high as 33 per cent in some states. While ruling out an "immediate" hike in the prices of petroleum products, Naik said the government was monitoring the situation closely. Members of the consultative committee expressed concern over the increase in prices of crude and petroleum products and their impact on the oil pool deficit, specially in view of the fact that over 70 per cent of the country's requirements are met from imports. The committee noted the adverse effect of these prices on Indian economy. It, too, felt that the government should watch the situation closely and appropriate alternatives, including price adjustments and adjustments in taxes and duties, should be considered. The committee broadly agreed with the road map for dismantling of administered pricing mechanism (APM) which includes reduction in subsidies for petroleum products to finally reach the subsidy level of 33.33 per cent of import parity on PDS kerosene and 15 per cent on domestic LPG which would come from the general budget instead of cross-subsidisation by other petroleum products. The members also called for taking steps to increase domestic production of crude oil, utilisation of alternative sources of energy, including alcohol produced from sugarcane, cutting down of wasteful use, checking adulteration and other malpractices in distribution, speedy appointment of dealers, and ensuring the benefits reach weaker sections.