New Delhi: Even as the ruling Congress continued to hedge its political bets, government policymakers have readied a proposal to hike prices of diesel, petrol, cooking gas and kerosene.
The petroleum ministry’s proposal, which could increase inflationary pressures on the economy, entails raising the prices of diesel, petrol, cooking gas and kerosene by as much as Rs2 per litre, Rs3 per litre, Rs50 per cylinder and Rs3 per litre, respectively, overturning decades of control by the government to shield consumers from global market fluctuations. Petroleum minister Murli Deora said his ministry will send its recommendations on the fuel pricing proposal on Wednesday to the cabinet for discussion. Home minister P. Chidambaram told reporters that the issue was not discussed at the Congress’ core committee meeting on Wednesday, which was also attended by Congress president Sonia Gandhi, her political secretary Ahmed Patel, Prime Minister Manmohan Singh, defence minister A.K. Antony and law minister M. Veerappa Moily.
State-owned oil refineries have sought the easing of the controls that pull down their earnings, though they are compensated in part through oil bonds given to them by the government. The removal of price controls would help private sector oil marketing companies such as Reliance Industries Ltd, Essar Oil and Shell India that so far haven’t been able to match the subsidized prices at which state-owned refiners sell fuel.
Any move to raise fuel prices could backfire on the United Progressive Alliance government, giving political parties added ammunition to attack the government, given the steep rise in inflation, especially that related to prices of food items such as sugar.
The Congress party, however, seemed to be preparing the ground for a possible price hike. “As long as there is no domestic or international compulsion, prices should not be increased. Even if the compulsion is there, it should be increased (by a) minimum in actual terms,” party spokesperson Abshishek Singhvi told reporters. The petroleum ministry’s proposals are based on the recommendations of a panel led by former Planning Commission member Kirit Parikh. The committee had suggested freeing petrol and diesel prices and an increase in retail prices of kerosene and liquefied petroleum gas (LPG) by Rs6 per litre and Rs100 per cylinder, respectively. Deora had earlier said that the Prime Minister was “very serious” about the recommendations.
Even though the administered pricing mechanism was to be dismantled effective 1 April 2002, the government still continues to control product prices. The subsidy offered on the sale of kerosene and LPG is Rs18.06 per litre and Rs287.59 per cylinder, respectively. Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd, which operate almost 95% of the retail outlets across the country, are expected to end the current fiscal year with total under-recoveries of around Rs43,000 crore.
PTI contributed to this story.