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Give subsidy to schools, hospitals, not oil firms: Montek

business Updated: Jul 11, 2010 14:02 IST

The government should use its money on building schools and hospitals rather than subsidising oil companies that are making huge profits because of the grant, Plan panel Deputy Chairman Montek Singh Ahluwalia said on Sunday.

"The profits that have been shown in the oil companies are largely due to subsidies. We are not supposed to be subsidising the oil companies...we should be paying for schools, education, hospitals and so on," Ahluwalia said in an interview to CNN-IBN.

The Left parties, which spearheaded the Bharat Bandh along with the BJP on July 5, had said that oil marketing companies were making huge profits, but the government was still talking about under-recoveries.

The opposition parties had called the Bandh to protest the hike in petrol and diesel rates. On June 25, the government raised petrol, diesel and kerosene prices by Rs 3.50, Rs 2 and Rs 3 a litre, respectively, and increased the rates for cooking gas by Rs 35 a cylinder.

IndianOil had made a profit of Rs 10,220 crore during 2009-10.

"I think the Left has got it wrong that these companies are making huge profits. These profits reflect the fact that a large subsidy is being paid to them," Ahluwalia said.

Agreeing that there is significant tax burden on petrol and diesel, he said, "You can eliminate a tax burden without recouping the revenue elsewhere. You could legitimately say don't tax petroleum, raise the same revenue by taxing everything else. Would anyone want that?"

Ahluwalia said that for LPG and kerosene subsidy government has to make up from petrol. "In the entire structure of petroleum prices, we are giving much lower prices for a large number of other items, so some built-in cross-subsidisation has to take place," he said.

"Somebody has got to pay for it (cheaper kerosene and LPG)-either it would be paid out of general revenues or it would be paid from petrol. I think it is better if it is paid from petrol," he said.

Ahluwalia said that in any case the government wants people to move away from the private transport to public transport.

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