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No LPG price cut in Delhi despite lower tax

The gains would be used by oil firms to bridge difference between cost and selling price of the subsidised fuel.

india Updated: Mar 13, 2006 20:24 IST

Domestic LPG prices will not come down in the national capital, despite the Delhi Government reducing VAT rates on cooking gas from 12.5 to 4 per cent.

The gains would be used by oil firms to bridge difference between cost and selling price of the subsidised fuel.

"There will be no change in prices at the consumer end," Petroleum Minister Murli Deora told reporters in New Delhi.

The public sector oil firms, he said were losing Rs 170 on sale of every LPG cylinder and the gain of about Rs 15 per cylinder (on account of lower VAT) would be used to partly cover the losses.

The reduction was not being passed on to the consumers, he said.

Petroleum Ministry officials said the Delhi government's announcement was of no consequence after the Union Budget extended the 'Declared Goods' status for LPG supplied for domestic use, thereby attracting a uniform Central Sales Tax of 4 per cent across the country as against current rates, which vary between 4 to 14 per cent.

"Even if the Delhi government had not announced the move, LPG in Delhi would have attracted a lower CST rate," an official said, agreeing to the proposition that the state government was trying to claim credit which was not due.

Fuel retailers -- IOC, BPCL, HPCL and IBP -- who lost Rs 9,680 crore this fiscal on account of selling LPG below cost price, would not pass on the tax relief to consumers.

Retailers stand to gain about Rs 1,400 crore from the move, which they propose to use for offsetting part of the losses, officials said.

After providing for government subsidy, oil firms lost Rs 148 on sale of every cylinder of LPG and Rs 12 on sale of every litre of kerosene.

First Published: Mar 13, 2006 20:24 IST