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Campaign for fuel subsidy hike

New Delhi, March 13: Petroleum minister Murli Deora today urged Prime Minister Manmohan Singh to increase the subsidies on LPG (cooking gas) and kerosene by 10 times on the lines of the assistance provided to food and fertiliser sectors. Such a measure would compensate public sector oil companies for the huge losses they suffer by selling LPG and kerosene at subsidised rates.

At a meeting with Singh, finance minister P. Chidambaram, and PM's economic advisory council chairman C. Rangarajan, Deora said oil companies are saddled with a subsidy bill of Rs 10,245.47 crore on LPG, Rs 14,384.38 crore on kerosene, Rs 12,284.21 crore on diesel and Rs 2,680.41 crore on petrol, while the budget provided only Rs 2,900 crore as subsidy for PDS kerosene and domestic LPG.

Sources said Deora pointed to the budgetary provision of Rs 24,200 crore for food subsidy and Rs 17,252.90 crore for fertiliser and demanded that a similar dispensation should be given to the oil sector to make it a transparent mechanism.

The meeting was held to discuss the recommendations of the C. Rangarajan committee report on long-term pricing formula for oil companies and tax structure rationalisation for the sector.

Deora highlighted the financial crisis faced by Indian Oil, Bharat Petroleum and Hindustan Petroleum because of under-recoveries on the sale of LPG, kerosene, diesel and petrol.

While the Union budget provision has remained static at Rs 2,900 crore, the government had to issue oil bonds worth Rs 11,500 crore to partially compensate oil companies for the losses on the two cooking fuels.

The current subsidy of Rs 22.5 per cylinder on LPG covered only one-tenth of the differential between the retail selling price and the cost of production.

Similarly, a subsidy of 82 paise per litre on kerosene was only a fraction of the Rs 13 per litre difference between cost and sale prices.

The Rangarajan committee on fuel pricing had suggested a hike of Rs 75 per cylinder of the domestic cooking gas and a Rs 1.21 per litre increase in petrol and a Rs 1.96 per litre hike in diesel prices.

However, the prices of these petroleum products have been kept on hold because of political compulsions of the government.

While the budget had fallen far short of the expectations of oil companies, Deora had managed to wrest some post-budget concessions for them from Chidambaram.

Chidambram had agreed to allow the cash-strapped oil marketing companies to borrow funds from the Oil Industry Development Board. Moreover, they will get government guarantees for loans to import crude.

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