New Delhi: The government will not price diesel differently for passenger cars, commercial vehicles and for other uses, as that will lead to abuse in the market place, oil minister S. Jaipal Reddy said on Wednesday.
“We can’t introduce dual pricing,” Reddy said. “It is not possible and will lead to a lot of abuse in the market place.”
Diesel is subsidized in India as it is used by farmers to run pumps and tractors. The subsidy—expected to be Rs 67,000 crore in 2011-12—applies at all fuel pumps where the fuel is sold.
S. Jaipal Reddy ,oil minister, (File photo)
Oil marketing companies are expected to lose a total of Rs 1.22 trillion for selling fuel below cost in the current fiscal year, which includes diesel, kerosene and liquified petroleum gas (LPG).
Former petroleum secretary S. Sundareshan had earlier said the ministry will examine whether owners of diesel-powered sport utility vehicles can be made to pay a higher price, in line with an argument put forward by former environment minister Jairam Ramesh.
A recommendation of differential pricing was also made by oil retailers.
Reddy on Wednesday said he wrote to the finance ministry on increasing duties on passenger vehicles and the latter was considering the proposal. Around 15% of India’s diesel is consumed by passenger vehicles.
A report by a panel headed by economist Kirit Parikh, which was submitted last year, recommended raising the excise duty on diesel-run vehicles. It had suggested additional excise duty of Rs 80,000 on diesel-driven passenger vehicles.
Diesel-run small cars of 1,200cc or less currently attract excise duty of 8%, and larger vehicles, 12%. Increasing demand for diesel-powered vehicles has led automakers such as Maruti Suzuki India Ltd, Mahindra and Mahindra Ltd and Ford Pvt. Ltd to make large investments in diesel engine technology.
An empowered group of ministers on pricing of petroleum products headed by finance minister Pranab Mukherjee is considering limiting the number of domestic LPG cylinders. Subsidy towards LPG cylinders account for Rs 25,000 crore towards notional losses by oil marketers.
In response to a question about delays in signing of production-sharing contracts (PSCs) for hydrocarbon blocks, bids for which were called under the ninth round of the new exploration licensing policy (Nelp), petroleum secretary G.C. Chaturvedi said: “The empowered committee of secretaries meeting took place. Certain clarifications were sought. It is in the final stage and we will prepare a note for the cabinet committee of cabinet affairs for the PSC signing.”
“There are some problems in 4-5 blocks,” he added.
India’s ninth round of auctions of hydrocarbon exploration blocks received a muted response in March, with foreign investors spooked by frequent revisions in government policy. While one block failed to elicit a bid, 33 blocks received 74 bids, the bulk of which were from state-owned oil firms. The final award of the rights to explore the blocks was to be given within four months, by which time the oil ministry would have scrutinized the 33 winning bids.
Reddy said his ministry would try to accommodate suggestions made by Comptroller and Auditor General of India in the 10th Nelp round, and is also open to revisiting its profit-sharing formula for awarding hydrocarbon blocks.
The government also plans to bid out shale gas blocks by the end of next calendar year.
“There are certain uncertainties and we are consulting international experts,” Reddy added.