Is LPG to cost Rs 75 more? | india | Hindustan Times
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Is LPG to cost Rs 75 more?

A DIFFERENCE of opinion has cropped up between Petroleum Minister Murli Deora and C. Rangarajan over the way forward for pricing petroleum products, especially that of LPG.

india Updated: Feb 15, 2006 01:34 IST
ARUN Kumar

A DIFFERENCE of opinion has cropped up between Petroleum Minister Murli Deora and C. Rangarajan over the way forward for pricing petroleum products, especially that of LPG.

Rangarajan, who heads the committee set up by the government to evolve a pricing mechanism along with a taxation regime for petroleum products, has recommended a steep hike in the price of LPG.

To offset the losses of the oil marketing companies, the Rangarajan Committee report -- which will be submitted to the government on Friday -- suggests that the heavily-subsidised LPG should cost Rs 75 more. It also suggests a hike of Rs 25 per quarter after that for the above the poverty line (APL) families. For BPL families, the committee does not want any changes.

By doing this, the committee reckons that the massive under-recoveries can be adjusted in the new financial year. It is believed that Deora is not at all keen on this steep hike in LPG prices.

There are differences, though minor, over hikes in the prices of petrol and diesel as well. While Deora wants that petrol prices should be raised by Re 1.27 per litre and diesel should be hiked by Rs 2.18 per litre from April 1, the Rangarajan panel has suggested to hike petrol prices by a little over Re 1 and diesel prices by a tad under Rs 2.

For kerosene, the committee does not want any changes for BPL families. But because it is also heavily subsidised, the panel wants market-determined rates for APL families. For starters, it wants an increase of Re 1.50 per litre.

The committee has favoured duty reduction on crude oil to 5 per cent and petroleum products to 7.5 per cent from the present 10 per cent. This is expected to soften the impact of surge in global oil prices on consumers.

Officials contend that the revenue implications of such a step is limited as the crude oil prices continue to be high. Further, it is doubtful that a price increase of any sort can be taken up before the state assembly elections before April.
The committee also wants the cess on crude oil to be hiked from Rs 1,800 per tonne to Rs 5,000 per tonne which will be borne by the two oil producing companies -- ONGC and Oil India and other private sector E&P companies.

The government on Tuesday said it was looking at ways to rationalise domestic prices of petroleum products to offset the adverse impact of global crude prices that experts feel would continue to rule high next fiscal.

"The government is fully seized of how to rationalise petroleum prices," Chief Economic Advisor Ashok Lahiri said at a conference on Energy Security. He declined to comment on whether the Rangarajan panel's recommendations would be incorporated in the next Budget.