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Petrol price up by Rs 5, diesel Rs 3
Indicating the government's helplessness in the wake of volatile international crude oil prices, petroleum minister Murli Deora said, “We were left with no option”. This decision will lead to an increase in inflation by 0.5-1 per cent, the effects of which will be felt by next week. However, the domestic price increase comes at a time when international crude prices are showing a recoil. On Wednesday, crude was trading at $124.01 a barrel in New York, down $11 from its May 22 peak of over $135 a barrel. The cooling of crude prices in international market is due to fears that developing economies may derail under high oil prices and not lift more oil in the coming year, say oil traders. According to sources in the finance ministry, these prices will see a partial rollback, wherein the price of petrol will be rolled back by Re 1, diesel by around Rs 1-2 per litre, as also the cooking gas by around Rs 20-30 per cylinder. On the part of the government, the finance ministry has reduced the customs duty on crude oil from 5 per cent to nil, and on petrol and diesel from 7.5 per cent to 2.5 per cent. The customs duty on other petroleum products like aviation turbine fuel (ATF) and naphtha has been reduced from 10 per cent to 5 per cent. The projected loss by the companies is around Rs 2,45,000 crore and the burden of this loss is being shared as follows: Consumers on account of price hike will contribute Rs 21,120 crore, the contribution by way of customs and excise duty cuts will be Rs 26,600 crore, ONGC and GAIL will contribute to the tune of Rs 65,000 crore and oil bonds worth Rs 95,000 crore will be issued. Revenue secretary P.V. Bhide said the loss to the exchequer would be around Rs 22,600 crore, and despite all measures, there would still be a gap of Rs 29,000 crore. Petrol and diesel prices were last raised in February 2008, when the Indian basket of crude was at $67 per barrel. Today it is at $124 a barrel.
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Oppn, allies call
for rollback New Delhi, June 4 The Left parties, already opposing the proposal, have argued in detail against this hike, suggesting other options to get over the crisis developing from the global rise in crude oil prices. It has given a call for a bandh and mass agitation in different parts of the country, particularly the states ruled by the Left Front, against the hike. The BJP has described the move as “economic terrorism” and even allies within the ruling UPA government like the Rashtriya
Janata Dal (RJD) of railway minister Lalu Prasad Yadav have called for a rollback. A statement by the CPM Politburo dismissed the government’s plea of losses being incurred by public sector oil companies and said, “They are not actual losses. The astronomical figures for under recoveries of oil marketing companies (OMC) that are being projected as their losses by the government are notional figures.” The CPM quoted the annual report of Reliance Industries Limited (RIL) and said “its profit from the refining business has increased from Rs 5,915 crore in 2005-06 to Rs 10,372 crore in 2007-08. Not a single paisa of tax has been paid out of these profits, which have nearly doubled in two years. A windfall profit tax of 20 per cent on such profits from refining as well as oil and gas exploration can help in mobilising at least Rs 2,000 crore,” the CPM argued. The leading Left party also pleaded for a cut in excise duty by Rs 3 per litre instead of Re 1 per litre that the government announced today. It asked the government to realise that in a global context where the price of crude oil was reigning at a high level, the only sustainable solution lies in restructuring duties on petro products and having a transparent pricing policy whereby the OMCs as well as the refineries did not retain hefty profit margins. “What is at stake today is not the market capitalisation of the oil companies but the livelihood of the working people, who are already suffering from back-breaking inflation,” the statement said. Simultaneously, the four Left parties also issued a joint reiterating the same point and reminding the government of these alternate proposals. It noted that “The government has refused to impose windfall profit tax on the oil and gas extracting companies and private oil refineries.” The PMK, an ally, asked the government to reconsider the hike in the price of LPG, saying the increase of Rs 50 per cylinder would adversely hit the common man. BJP spokesman Rajiv Pratap Rudy, meanwhile, described it as a “shocking, disturbing and dangerous” decision. Dismissing the government’s plea of inevitability of its move, Rudy said, “We appeal to the Prime Minister not to sermonise and shed crocodile tears. He will be taught a lesson for this.” Rudy also said, “He (the Prime Minister) has said the hike is inevitable, we say if that is inevitable, his exit too is inevitable.” The RJD described it as, a “step toward death warrant” of the ruling alliance. RJD general secretary Vijay Krishna asking for a rollback described the move as “unfortunate” and asked the Prime Minister not to ignore the opposition to the decision and review it immediately.
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Hike minimal: PM New Delhi, June 4 In an address to the nation explaining the reasons for effecting the hikes, Manmohan Singh said: “I know that the price increase that we had to announce today will not be popular, even though they have been modest. You must remember that the government is bearing the burden of issuing oil bonds. Our oil companies are making a large sacrifice and are under severe stress.” Manmohan Singh, whose government is bound to come under intense pressure from the Left parties to reduce the price hikes in the coming days, said the country must learn to adjust to the new international scenario. “We need
to learn to adjust to be efficient and economical in our use of energy. And we need to pay the economic cost of petroleum products. There are limits to which we can keep consumer prices unaffected by rising import costs. Our oil companies cannot go on incurring losses. This way, they will have no money to import crude oil from abroad,” Singh said. He urged the state governments, which collect huge sales tax on petroleum products, to share the burden by cutting levies and appealed to the people to learn to pay the actual economic costs of petro products. He also called for conservation of energy and development of renewable sources, including nuclear energy. He pointed out that the international prices of crude had gone up over three-fold, from $39 in 2004 to more than $130 now and keeping the retail prices unchanged would result in an annual loss of Rs 2,00,000 crore. The Prime Minister ruled out abolition of duties on petroleum products to offset the spiraling international prices, saying the government had limitations. “To compensate them (oil companies), the Centre has reduced taxation of petroleum products to the extent possible. But given the commitments of the government for vital development and non-development expenditure, taxes on petroleum products cannot be completely eliminated. Thus a rise in prices is inevitable,” he said.
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New Delhi, June 4