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Petroleum products: Govt readying itself for a price hike?

Our Bureau

While Mr Aiyar declined to comment on the various options, sources said one of the suggestions likely to be made by the Ministry would be for dual pricing for LPG and kerosene.

New Delhi , Dec. 13

WITH the subsidy burden continuing to grow heavier, the Government is looking at various pricing options for petroleum products. The Petroleum Ministry will make a presentation to the Energy Coordination Committee (ECC), headed by the Prime Minister, Dr Manmohan Singh, on December 16, listing out the various options available to the Government.

Speaking on the sidelines of the Asian Oil and Gas Summit here on Tuesday, the Petroleum Minister, Mr Mani Shankar Aiyar, told newspersons that a discussion paper for the ECC has been prepared detailing different options for the sector. "It also gives the implications of the various options. A decision in this regard will ultimately be taken by the Union Cabinet," he said.

Dual pricing: While Mr Aiyar declined to comment on the various options, sources said one of the suggestions likely to be made by the Ministry was for dual pricing for LPG and kerosene.

The Petroleum Ministry had recently called a meeting of the State representatives to discuss the issue of dual pricing for LPG and kerosene with different rates for below the poverty line (BPL) and above poverty line (APL) consumers. To help the Government formulate a position on pricing of petroleum products, the expert committee headed by the Chairman of the Prime Minister's Economic Advisory Council, Dr C. Rangarajan, which is looking into the pricing of petrol, diesel, LPG and kerosene, is also expected to make a presentation to the ECC, the sources said.

Tax components: A break-up of price components of the four petroleum products — petrol, diesel, liquefied petroleum gas (LPG) and kerosene — reveals that the tax element weighs heavy on the retail price of the products, particularly petrol and diesel.

Giving a break-up in the Rajya Sabha on Tuesday, the Petroleum Minister said the cost of production of petrol was only Rs 19.58 per litre, whereas the Customs duty, excise duty and sales tax take the retail price to Rs 43.49 a litre (in Delhi). The tax component is almost 55 per cent.

For diesel, the tax component in the retail price is almost 34 per cent, with customs duty of 6 per cent (Rs 1.81), excise duty of 17 per cent (Rs 5.07) and sales tax of 11 per cent (Rs 3.39). This takes the retail price to Rs 30.45 a litre in Delhi, while the basic cost of production of diesel is only Rs 20.18 a litre. As for cooking gas, while the production cost of one cylinder of LPG is Rs 261.97, local sales tax of Rs 32.75 takes the selling price to Rs 294.75. For kerosene, the per-litre cost is Rs 8.70, while the selling price is Rs 9.05.

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