Financial Daily from THE HINDU group of publications
Tuesday, Jun 04, 2002
Industry & Economy - Petroleum
Govt hikes petrol, diesel prices; cuts excise duty
NEW DELHI, June 3
THE Government today raised the price of petrol by around Rs 2.50 per litre and that of diesel by Rs 1.50. The hike is effective from midnight today. It has simultaneously cut the excise duty on petrol and diesel by 2 per cent.
Oil marketing companies would, hereafter, revise retail prices of petro-products every fortnight, thus heralding the onset of true de-regulation in petro-product pricing.
The Government would review the trends in global crude prices on a quarterly basis and change the taxation structure in the event of any steep volatility in international prices, the Union Petroleum Minister, Mr Ram Naik, said at a press conference here.
Even after the hike in retail prices and cut in duties, the gap between the selling price and the costs is around Re 1 per litre for petrol and Rs 0.60 per litre for diesel, given the present international crude price of less than $24 per barrel.
In the case of LPG, the subsidy has gone up by Rs 10 per cylinder over the Rs 90 per cylinder level in March. In the case of kerosene, it is around Rs 1.50 per litre over the March level of Rs 9 per litre.
It seems likely that the oil companies will undertake a phased increase in retail prices to align costs with the selling price of petro-products, in case the crude prices stay firm.
Besides, the Government has also committed itself to reimbursing oil marketing companies Rs 2,000 crore that had been lost due to the under-recovery of costs in the sale of petrol and diesel over the last two months. The reimbursement might be done by issuance of bonds or it might be a cash transaction, Mr Naik said.
The retail product prices were last set when the global crude prices ruled at $20 per barrel. However, over the last three months, the prices have risen to over $25 per barrel, with oil companies having been forced to absorb the extra burden. For April and May, the average crude procurement price for the Indian refiners was $25 per barrel.
From the exchequer's point of view, the limited exercise of increasing consumer prices and reducing duties is revenue neutral at the current international crude prices.
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