Consumers should be prepared to pay a higher price for auto and cooking fuels as the finance minister Pranab Mukherjee set the stage for increasing the consumer prices of petrol, diesel and cooking gas (LPG) by announcing the government’s intentions to limit fuel subsidy in the fiscal ahead.
Mukherjee announced that the 2012-13 fuel subsidy has been targeted lower at Rs 43,580 crore compared to Rs 68,481 crore in this fiscal.
Although no clear cut measures were announced on fuel price deregulation by Mukherjee, a statement from Prime Minister Manmohan Singh after the Budget presentation made it clear that a hike in price of petroleum products was around the corner.
“That is obviously the task which has required the government to put forward an effective programme for adjusting the prices of petroleum products and adjusting other relevant prices,” Singh said.
“So we have to bite the bullet. There is no other way in which you can reduce subsidies,” Singh said.
However, another significant announcement in the Budget on raising the cess on domestic crude oil production by 80%—to Rs 4,500 per ton from the present R2,500 per ton— led to a harp fall in the stock prices of oil producing companies such as ONGC, Cairn India, OIL and Reliance Industries.
While Cairn slumped 7.4%— the biggest intra day decline since August 5, and traded at Rs344.4 in Mumbai, ONGC fell 5.4%, Oil India Ltd (OIL) declined 5.1%.
RS Sharma, former CMD, ONGC, said that ONGC will suffer a revenue loss of over Rs 5,100 crore on account of this cess and another Rs 300 crore as impact of the increase in service tax.