New Delhi, Feb 26 (Calcutta Tube) Petrol and diesel prices will increase by six to eight percent from Friday midnight after Finance Minister Pranab Mukherjee’s budget restored basic duty on the fuels and raised central excise duty by Re.1.
This translates into an increase of Rs.2.71 per litre for petrol and Rs.2.55 per litre for diesel in Delhi.
In his 2010-11 budget speech, Mukherjee said that with oil prices rising alarmingly to about $112 per barrel last year the government had exempted fuel from basic customs duty to give relief to oil marketing companies.
But with global prices comparatively lower right now, the government has taken the step to improve the fiscal position by restoring basic duty and increasing excise duty.
‘In view of the pressing need to move back to a fiscal consolidation path, I propose to restore the basic duty of 5 percent on crude petroleum; 7.5 percent on diesel and petrol and 10 percent on other refined products. I also propose to enhance the Central Excise duty on petrol and diesel by Re.1 per litre each,’ said Mukherjee.
‘Oil marketing companies are not in a position to absorb these (revision of basic customs duty and excise duty) and are passing them on to consumers, resulting in increase in petrol and diesel prices,’ Petroleum Secretary S. Sundareshan later told reporters here.
In Delhi, the petrol price would increase to Rs.47.43 per litre while diesel would increase to Rs.35.47 per litre.
Similarly, in Mumbai, Chennai and Kolkata, petrol would now be priced at Rs.52.67, Rs.51.59 and Rs.51.15 per litre respectively. For diesel, the upward revision would result in a cost of Rs.48.83, Rs.48.65 and Rs.48.32 per litre in the three cities respectively.
The fuel price increase provoked angry opposition MPs to walk out of the Lok Sabha, possibly the first time during a budget presentation.
The duty of five percent on crude petroleum would be a major hit for refiners like Reliance and Essar, which have been instrumental in making India a refining hub in the region.
Mukherjee made a special mention of the Kirit Parikh Committee, which had submitted its report recently on a viable and sustainable system of pricing of petroleum products.
It had recommended price deregulation of petrol and diesel, as well as a sharp decrease in subsidy of cooking gas and kerosene. However, expecting a political fallout, the government has so far dithered on implementing the recommendations, after criticism from allies and the opposition.
‘Decision on these recommendations will be taken by my colleague, the minister of petroleum and natural gas, in due course,’ said Mukherjee.
The total under-recoveries of the oil marketing companies are expected to reach Rs.40,000 crore this year, with the government not willing to go by the earlier formula of providing oil bonds. Instead, the finance ministry has only given Rs.12,000 crore in cash so far.
‘I have made a conscious effort to avoid issuing bonds to oil and fertiliser companies. I would like to continue with this practice of extending government subsidy in cash, thereby bringing all subsidy related liabilities into our fiscal accounting,’ Mukherjee said.
Petroleum Minister Murli Deora welcomed the move, saying this will make the ‘financial assistance from the government timely, transparent and beneficial to the public sector oil marketing companies’.