The Telegraph
Since 1st March, 1999
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Deal on moderate oil price increase

New Delhi, June 14: The government is expected to announce a moderate hike in petrol and diesel prices tomorrow.

As a precursor to the revision, a meeting was held today between Prime Minister Manmohan Singh, finance minister P. Chidambaram and petroleum minister Mani Shankar Aiyar.

It is expected that the price of petrol will be raised by a little over Re 1 a litre and of diesel by a little less than a rupee as it is used in politically sensitive public transport and agriculture.

The Left parties gave their green signal to the hike after Aiyar met the heads of the CPM and the CPI.

CPI leader A.B. Bardhan said: “We have said petrol prices may be raised but in a manner which does not hit the common man... cooking gas and kerosene prices should, however, remain stable.”

Aiyar held long discussions not only with the Left, which supports the government from outside, but also with alliance partners Ram Vilas Paswan of the Lok Janshakti Party and Dayanidhi Maran of the DMK.

The minister told reporters: “You say we don’t know coalition dharma. I am showing you how we go about taking important decisions.”

Finance ministry officials said they had agreed earlier in the day to lower duties on crude oil to moderate the price increase. Without a cut in duty, prices would have had to be raised by as much as over Rs 3 a litre.

Rationalisation of customs and excise duties on petroleum products will be attempted in the budget next month. These levies constitute a large part of the price of products.

The petroleum ministry has long been advocating reduction of duties along with a restructuring in a manner that they do not shoot up with every increase in prices, as is now the case. It is a sensitive issue for the finance ministry as petroleum products yield close to 30 per cent of all tax collections.

The new government is grappling with a surge in world crude oil prices of $6 per barrel with worrying consequences for domestic oil companies which have not been allowed to raise petrol and diesel prices since January this year. Cooking gas and kerosene prices have not been revised since April 2002.

Indian Oil Corporation has taken a hit of Rs 2,139 crore in its profits in April-June of 2004.

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