The Telegraph
Thursday , December 23 , 2010
Since 1st March, 1999
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Govt to spare diesel for now

New Delhi, Dec. 22: The spike in global crude prices could further inflate the oil subsidy bill, but the government might choose to put a diesel price hike on hold because of political considerations.

“If global crude prices rise further, oil subsidies will increase,” finance secretary Ashok Chawla said. Global crude oil prices are now hovering at $90 per barrel.

The finance ministry has committed Rs 13,000 crore out of the Rs 31,367 crore retailers have lost for selling fuel below cost during the April-September period of this fiscal.

While the government deregulated petrol prices in June, state-owned firms continued to sell diesel, domestic LPG and kerosene below cost to keep inflation under check.

Chawla, however, was confident of maintaining the fiscal deficit at the projected 5.5 per cent of GDP (gross domestic product) even after the increase in the subsidy.

On the possible cut in duties to reduce prices, Chawla said issues on what could be the “duty structure would be considered in the run-up to the budget”. Central and state taxes account for almost 50 per cent of fuel costs.

The government, under attack from the Opposition over a slew of corruption scandals and rising prices of essential goods, may want to cut taxes to keep retail prices under control and avoid voter anger.

A meeting on the empowered group of ministers has been proposed next week to discuss diesel prices. However, according to sources, the current onion crisis, which could push up food prices, may force the empowered group to defer a decision on a price hike at the meeting.

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