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Massive kerosene, LPG price-hike likely in budget

Sandesh Prabhudesai in Panaji

The central government is contemplating a massive hike in kerosene and liquefied petroleum gas prices in the annual budget to be presented on February 29, 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 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 under the WTO obligations, Naik said Prime Minister Atal Bihari Vajpayee and Finance Minister Yashwant 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," says 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 sectors 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 refused to divulge the formula to be adopted in subsidy reduction.

While subsidies on kerosene are almost double than the Rs 40 billion subsidy paid annually on the LPG, Naik feels the price hike in kerosene however would help control 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 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 kilogram against Bangladesh's Rs 17.57, Pakistan's Rs 15.75 and Sri Lankan's Rs 14.44.

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 4 billion by foreign airlines to the public sector oil companies is also under consideration, he added.

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