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Petroleum Ministry for early hike in fuel prices

business Updated: May 27, 2008 20:28 IST

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The Petroleum Ministry has proposed a Rs 10 a litre hike in petrol, Rs 5 per litre increase in diesel and Rs 50 per cylinder rise in LPG prices, as the Finance Ministry was unwilling to cut duties to cushion the impact of crude prices on oil companies.

Oil Minister Murli Deora, who first met Finance Minister P Chidambaram seeking lowering of customs and excise duty, also called on External Affairs Minister Pranab Mukherjee and finally Prime Minister Manmohan Singh to explain the Rs 225,000 crore burden the spike in global prices was putting on oil PSUs this fiscal.

Chidambaram is believed to be against cutting customs duty on crude to zero, reducing import duty on petrol and diesel to 2.5 per cent from 7.5 per cent and halving excise duty on the two fuel as sought by the Petroleum Ministry, official sources said.

A proposal to levy a cess or surcharge on all direct and indirect taxes also did not find favour with Chidambaram, as he felt it is tantamount to taxing people not using subsidised fuel.

Sources said even after the hike in petrol, diesel and LPG prices, duty cuts, giving retailers oil bonds worth Rs 35,000 crore and upstream firms like ONGC chipping in Rs 30,000 crore, a gap of Rs 51,000 crore was left to be covered.

BPCL and HPCL have cash to buy crude oil only till July while Indian Oil can finance imports till September. The three firms face huge liquidity crisis as they are unable to realise full value of products sold.

"We don't want to see scarcity of petroleum products particularly kerosene and LPG," Deora told reporters. "PSUs are in a precarious state and a solution needs to be found."

Deora said some proposals were discussed but "nothing has been agreed".