Minister of Petroleum and Natural Gas Murli Deora on Friday welcomed the budget and also justified the fuel price increase by the restoration of basic customs duty and increased excise duty.
In a statement after Finance Minister Pranab Mukherjee presented the union budget before parliament, Deora said that the current average price of the Indian basket of crude was around $70 per barrel - much less than the average price of $120 per barrel in June 2008.
He said that it was to "insulate" the consumers from high international oil prices that the government had then reduced the basic customs duty to 2.5 percent.
"Now since the average price of Indian basket of crude oil is around US$70 per barrel, the finance ministry has restored the basic Customs Duty of 5 percent on crude oil and 7.5 percent on petrol and diesel. Also, the Central Excise Duty has been enhanced on petrol and diesel by Re.1 per litre each," said Deora.
The price of petrol is likely to increase by Rs.2.77 per litre and diesel by Rs.2.55 per litre after the revision.
The oil minister also praised the finance minister for "ably balanced fiscal discipline while maintaining the momentum of high economic growth and supported his efforts to reduce the fiscal deficit to 5.5 percent".
Interestingly, Deora welcomed the announcement that instead of oil bonds, government will give subsidy on fuels in cash. "This will mean that the financial assistance from the government will be timely, transparent and beneficial to the public sector oil marketing companies," he added.
The oil marketing companies are likely face a loss of Rs.40,000 crore in this fiscal year for selling auto and cooking fuels at a subsidized rate domestically.