Left warns Govt on fuel price hike
The warning came during their meeting with the Petroleum Minister after Govt mooted a hike in petrol and LPG prices.india Updated: May 10, 2006 21:48 IST
Left parties on Wednesday warned Government not to increase petrol, diesel and LPG prices.
They said they would not allow an increase for the third time in the two-year duration of Manmohan Singh-led UPA Government even as Petroleum Ministry has made a strong case for mitigating the spurt in international crude price.
The warning by the ruling coalition's left allies came during their meeting with the Petroleum Minister Murli Deora after his ministry made a presentation saying that a hike of Rs 114.45 per cylinder of cooking gas, Rs 9.33 a litre of petrol and Rs 10.43 a litre of diesel besides Rs 17.16 a litre of kerosene was needed to save the national oil companies from bankruptcy.
Instead, the left leaders asked the Finance Minister to part with Rs 60,000 crore oil cess and consider slashing of import and excise duties to cover the PSUs losses and spare the common man from the pressure of price hike.
"Twice you have been allowed (to raise fuel prices), we would not allow it for the third time," CPM leader Sitaram Yechuri told Deora, who said that in case no steps were taken oil companies would suffer a revenue loss of Rs 73,512 crore during the current fiscal.
Later talking to reporters, CPI leader Gurudas Dasgupta, who had met Deora on Tuesday also, said, "The threat of withdrawal of support was not necessary (to stop government from raising prices). We can stop the government even otherwise."
The Manmohan Singh Government had for the first time raised petrol price by Rs 2.50 per litre and diesel by Rs 2 a litre on June 21, 2005 and then by Rs 3 and 2 a litre respectively on September 7, 2005. As against a crude price of $51 per barrel taken at the time of last price hike, the Indian basket of crude was currently ruling at $70.92 per barrel.
"We are against any increase in price of petroleum products. Government's arguments have proved to be hollow... this sector is the easiest way to get revenue as 20 per cent of the total revenue come from it. The Government needs to absorb (the impact of surging global prices)," Dasgupta said.
"There are alternatives which the Government needs to explore... The consumers cannot be burdened," Yechuri categorically said when the ministry stated that petroleum products were being sold by the oil PSUs at a substantial loss.
Instead, the Left parties asked the Government to cut import duty on crude and products, levy specific excise duties instead of present system of a mix of ad valorem and specific rates and increase Budgetary subsidy support.
They also asked Finance Ministry to part with the Rs 60,000 crore collected from levy of a cess on domestically produced crude oil.
Yechuri said the projected under-recoveries by not raising fuel prices stands at Rs 73,512 crore, short of Rs 77,800 crore in taxes collected by the Finance Ministry in 2005-06. "These can more than offset the under-recoveries."
The Left parties wanted the present system of upstream firms like Oil and Natural Gas Corp (ONGC) chipping in to share the under-recoveries to continue.
"ONGC's net earning on crude oil it produces should continue at $37 a barrel with the remaining incremental revenue from increase in international prices (estimated at Rs 24,000 crore) be transferred to oil retailing firms."
Yechuri said when in 1996 the roadmap for dismantling of Administered Pricing Mechanism (APM) was laid, it was suggested that the sector be deregulated from April 2002 and duties progressively brought down to nil. "The latter promise has not happened."
Deora said the ministry had not made any specific proposal for increase in fuel prices. "We are trying our best to see that price rise is avoided... That is why these consultations."
Asked about the effectiveness of Left's threats after the government ignored its protests on two previous occasions, Yechuri said "our pressure had ensured that the price hike was not Rs 11 for petrol, Rs 10 for diesel, Rs 5 for kerosene and Rs 100 per cylinder for LPG."
He also sought change in the present pricing mechanism by replacing the imported cost of products with that of crude in arriving at the retail price.
Dasgupta said the Finance Ministry had been treating the oil sector as major source of revenue. With advolerum rates, tax revenues rose with increase in international price but its burden did not rise proportionately.
In the 13-slide presentation, the Oil Ministry highlighted that oil retailing firms -- IOC, HPCL, BPCL and IBP -- stand to lose Rs 27,182 crore in revenues on unchanged kerosene and LPG price in 2006-07 and Rs 46,330 crore on petrol and diesel.
If prices and duties remained unchanged, Indian Oil Corp (IOC) may end the fiscal with a revenue loss of Rs 36,614 crore, Hindustan Petroleum Corp (HPCL) with Rs 15,250 crore, Bharat Petroleum Corp (BPCL) with Rs 16,682 crore and IBP would end the year with Rs 4,967 crore under-recovery.