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Petrol, diesel price hike not justified: CPI(M)

The party said the government should share some of the windfall with the oil marketing companies.

india Updated: Jun 05, 2006 17:19 IST

The CPI(M) on Monday said the proposed hike in prices of petroleum products was not justified as the government has been the beneficiary of rise in prices of crude and should share some of the windfall with the oil marketing companies.

"While the subsidy from the government has been shifted to oil marketing companies, the revenue earned by the government has gone up from Rs 96,000 crore to Rs 1,26,000 crore," the party said in a note to Prime Minister Manmohan Singh, sent hours before the Cabinet is to decide on the quantum of price hike.

The note said after the dismantling of Administered Price Mechanism in 2002, the government subsidy on PDS kerosene and domestic LPG has gone down from Rs 11,140 crore to Rs 3,000 crore in 2006-07 therefore the government has been a net gainer while oil companies take on the burden of subsidy.

"This policy distortion has to be corrected in the interest of the common people and government should share the burden of subsidy with the oil companies," CPI(M) said.

"At present the tax and duty component on petrol and diesel is 57 per cent and 36 per cent. This has to be restructured to offset any price hike," it said.

The party said that to insulate consumers from the hike, a price stabilisation fund should be created from the cess of Rs 2,500 per MT for supporting oil companies and excise duty on products should be reduced and should be specific without any Ad Valorem content.

First Published: Jun 05, 2006 17:19 IST