Saturday 05 December 2020

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Economy | Finance

Kerosene, LPG prices to go up, not of petrol & diesel

 

The central government is contemplating massive hike in kerosene and LPG prices in the annual budget to be presented on 29 February, though the same policy in oil prices may not affect petrol and diesel.

Ram Naik, the union minister for petroleum and natural gas, during his Goa visit clearly indicated that cutting down subsidy on oil products from this year is inevitable as a part of the administered pricing mechanism, planned in September 1997 during the United Front regime.

As deregulation of prices has to be completed by 2002, Naik said prime minister Atal Bihari Vajpayee as well as union finance minister Yeshwant Sinha have agreed to begin it in three stages from this year. "You will find its place in a concrete shape in the coming budget", he said.

However, as the policy decision of '97 also contains annual reduction of five per cent import duty from last year, he says the government would go ahead with the reduction by 10 per cent this year, due to which the gravity of subsidy cut may not be felt so much.

"The hike in petrol and diesel prices also may not be thus necessary", feels Naik. He ruled out any hike in diesel price stating that diesel prices have reached a saturation point and the transport as well as agriculture sector would suffer in case of further hike.

As subsidy on LPG almost comes to Rs 144, implementation of the administered pricing mechanism would affect the LPG sector in a massive way, though the amount would be reduced in three stages. Naik simply refused to divulge the formula to be adopted in subsidy reduction.

While subsidies paid on kerosene are almost double than the Rs 4000 crore subsidy paid annually on the LPG, Naik feels the price hike in kerosene prices however would help controlling adulteration of kerosene in other oil products. "Almost 50 per cent kerosene is used only for adulteration purpose in the country", he admits.

In order to justify the proposed hike, Naik also points out at much higher rates of kerosene prices in the neighbouring countries, like Rs 11.36 per litre in Bangladesh, Rs 8.68 in Pakistan and Rs 5.98 in Sri Lanka against India's price of Rs 2.59. Similarly, Indian LPG is priced at only Rs 10.29 per kg against Bangladesh price of Rs 17.57, Pakistan price of Rs 15.75 and Sri Lankan price of Rs 14.44.

While addressing the ninth international aviation seminar organised by Indian Oil here earlier, Naik also announced his intention to come out with a legislation to exempt sales tax on aviation turbine fuel for some of the foreign airlines having bilateral treaty.

The request to reimburse accumulated outstanding of Rs 400 crore by foreign airlines to the public sector oil companies is also under consideration, he added.


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