Be prepared to pay more for your auto fuel and cooking gas, though the exact amount may depend on political decisions
The report reflects the genuine concerns of the oil industry. But these have to be evaluated in the context of the larger socio-economic reality. And we are confident the government will keep the macro-economic picture in mind.
If the recommendations are based on economic criteria and if they don’t burden low-income people, there shouldn’t be a problem supporting them. High-income people can absorb some hike in prices.
The poor are already groaning under the weight of price rise. Are we to deny them the right to live? The recommendations lack sense and are highly unacceptable, as these would create further disparities in society.
Let the government decide what it wants to do with the report. But it must bear in mind that the poor at this juncture cannot take any burden when inflation is already so high.
A Prime Minister-appointed expert group headed by economist Kirit Parikh suggested in its report released on Wednesday that petrol and diesel prices must be freed from government control, cooking gas must cost Rs 100 more per cylinder and kerosene Rs 6 more per litre.
At current global crude prices of $73 per barrel, free-market auto fuel pricing will mean an increase of Rs 4.72 per litre for petrol and Rs 2.33 for diesel.
The government has been cushioning retail prices of fuel with its subsidies, or by forcing state-controlled oil companies to sell at low prices in exchange for bonds that only add to its debt burden. Now short of cash, the government is groping for a way out.
“Dr Manmohan Singh is very serious on fuel pricing reforms,” Petroleum Minister Murli Deora told a news conference.
“We (Congress) are a huge party and there will be opposition from some party members. But tough decisions will have to be taken,” Deora said.
His ministry will forward its own views on the report to the cabinet within a week.
“Current petroleum product pricing policy of the government is not sustainable,” Parikh told reporters.
While there is fear that fuel price hikes may trigger a fresh round of inflation, Parikh said this was unavoidable in the face of rising global oil prices that pressured the government’s purse. Government sources indicate that diesel, which has a cascading impact on food prices, may not be significantly revised but petrol, consumed by affluent car owners, may come in for strict treatment.
The finance and petroleum ministries are in tandem on petrol prices.
Liquefied petroleum gas (LPG) used in kitchens may be moderately increased as it mainly affects urban households, while kerosene, fuel of the poor, may be largely spared.
“One litre of kerosene, currently priced at Rs 9 a litre, costs even less than a one litre mineral water bottle. How can we justify this kind of pricing?” Deora told HT after receiving the report from Dr. Parikh.
Kerosene prices have not been revised since 2002 while cooking gas prices have remained untouched since 2004. The current subsidy on kerosene stands at around Rs 18 per litre while that on a 14.2 kg cooking gas cylinder is as high as Rs 287.
Diesel currently has a street price of Rs 32.87 in Delhi while cooking gas costs Rs. 281.20 for a 14.2-kg cylinder.
“While subsidy should flow to the below the poverty line (BPL) consumers, it is time to pass on some increase in the prices of cooking gas and kerosene,” said the report of the Parikh panel, which also included Finance Secretary Ashok Chawala and Oil Secretary S Sundareshan.
“If the government has to bite the bullet on fuel pricing, this is the right time. If we delay, there will be election pressures and any bold decisions may not happen,” said a minister in the UPA government on condition of anonymity.
Bihar, a key state where the Congress is looking to expand its foothold, will go for assembly elections in October this year.