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Oil price hike may lead to clash
Finance, Petroleum Ministries divided
From T.V. Lakshminarayan
Tribune News Service

NEW DELHI, Aug 19 — The Finance Ministry and the Ministry of Petroleum and Natural Gas are heading for a clash on the issue of oil price hike.

The Minister for Petroleum and Natural Gas, Mr Ram Naik, issued a warning here when he said it may not be possible to hold the price line for an indefinite period.

The prices of crude oil in the international market had registered a sharp increase recently leading to the peak price of Dubai crude oil on August 15 at $ 27.03 per barrel or Rs 8912 per tonne. The extremely volatile oil prices reached its 10-year high and were 159 per cent higher as compared to the January-March 1999 crude oil price of Rs 3429 per tonne.

It may not be possible to keep the prices unchanged in view of the sharp increase in the international market prices of crude oil, he said. He, however, said a reduction in the duties and taxes on petroleum products, including sales tax levied by the state governments, would help contain the domestic prices.

The sales tax on petroleum products in some states was as high as 33 per cent and there was a subsidy of Rs 125 per cylinder of LPG and Rs 5.16 per litre of PDS kerosene. The prices of high speed diesel, which should be sold at import prices under the plan to dismantle administered price mechanism, also carries a subsidy of Rs 2.12 per litre.

The Finance Minister, Mr Yashwant Sinha, has refused to join issue with his colleague in the Petroleum Ministry. He has only said that the rising international prices of oil were a cause for concern. "The prices are a thin line of worry as crude is now $ 33 a barrel,” he commented.

The high incidence of tax rates on petroleum products has been a matter of debate with the Petroleum Ministry claiming that it was not fair that it undertake the burden of price increase in the international market through an increasing oil pool deficit.

The Finance Ministry however, claims the gains and losses were cyclical in nature. Official sources said when the international market prices rule low then the Ministry of Finance suffers as the customs duties and other import duty comes down. However, at times when the prices are high the revenue collections are high.

Moreover, the government is committed to dismantling administered prices by April 2001 and keeping the prices of petroleum products on a par with import prices.

It is easier said than done, say officials in the Petroleum and Natural Gas Ministry. When the general election was round the corner it was not politically advisable to go in for a increase in prices of oil products. 

Mori asks India, Pak to sign CTBT

DHAKA, Aug 19 (PTI) — Japanese Prime Minister Yoshiro Mori today called upon India and Pakistan to sign the Comprehensive Test Ban Treaty (CTBT) for establishing peace in the South Asian region.

Both India and Pakistan should follow the example of Bangladesh which has already signed the CTBT, Mr Mori said during talks with his Bangladeshi counterpart Sheikh Hasina.

Mr Mori, who embarked on his week-long tour of South Asian nations today with first stop in Dhaka, expressed concern on the security situation in the region.