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Auto, cooking fuel prices may rise

 

Consumers may soon need to pay more for petrol and diesel with the petroleum ministry partly accepting the Kirit Parikh committee’s recommendations and referring the matter to the Cabinet for a decision.

The petroleum ministry has suggested an immediate increase of Rs 3 and Rs 2 for petrol and diesel respectively, in line with the recommendations of the Parikh committee, which submitted its report last week, but has chosen to push for half the rise recommended in LPG and kerosene.

“We recognise that both LPG and kerosene affects the life of common man and are, therefore, proposing a phased increase in both these products. While the committee has recommended Rs 100 hike on a domestic LPG cylinder and Rs 6 on a litre of kerosene, the ministry is in favour of raising it by Rs 50 and Rs 3, respectively,” a senior ministry official said. He said the extent of hike will be a political decision.

The Congress core committee, comprising Congress president Sonia Gandhi and Prime Minister Manmohan Singh among others, met today to take a political call on the issue. Petroleum minister Murli Deora, who is not part of the committee, did not attend the meeting. He is expected to present his recommendations to the Cabinet tomorrow.

Earlier in the day, he held consultations with other United Progressive Alliance (UPA) allies, which is divided on the issue. UPA partners such as the Trinamool Congress and Dravida Munnettra Kazhagam (DMK) do not favour a price price. The Trinamool, which is readying to face Assembly elections in Left-ruled West Bengal in 2011, has convened its core committee meeting in Kolkata tomorrow to protest against the move.

The opposition Bharatiya Janata Party (BJP) today staged a massive rally against inflation and a possible fuel price rise in New Delhi. The main opposition party plans to carry out a nation-wide stir over the petroleum price issue.

The Congress, the dominant party in the ruling alliance, has lined up its defenses for an increase. Calling the increase “unavoidable”, the party claims that it is trying to ensure that the increase is the “bare minimum” and has the least impact on the common man.

“A decision may be unavoidable but it has to be demonstrably unavoidable and have minimum impact on the aam aadmi,” said party spokesman Abhishek Manu Singhvi.

To reduce the underrecoveries that state-owned oil marketing companies suffer in selling LPG and kerosene below cost, the committee has suggested periodic reductions in kerosene allocations via the public distribution system based on the level of electrification in villages plus a periodic price increase. The eventual goal, however, is to move to a smart card system of direct subsidy by using a unique identification number.

The petroleum ministry will also work out a new burden-sharing mechanism for the subsidy on domestic LPG and kerosene in consultation with the finance ministry. Currently, under-recoveries on auto fuels are fully compensated by discounts from upstream companies like ONGC, OIL and GAIL and those on sales of kerosene and LPG is compensated by the government, either through bonds or in cash.

Under the new mechanism, ONGC and OIL are required to share a portion of their incremental revenue from nominated blocks with the government, which, in turn will use these funds to subsidise LPG and kerosene.