Monday, September 25, 2000,
Chandigarh, India


M A I N   N E W S

States asked to share oil price burden
Consumer to bear only 33 pc of hike

NEW DELHI, Sept 24 (PTI) — Gripped by a crisis to manage the whopping oil pool deficit of Rs 23,600 crore in the face of surging international crude prices, the centre today appealed to the states to mitigate the burden of hike in petro-product prices on consumers by slashing sales tax by 5 per cent.

"I am going to write to all the chief ministers to cut sales tax on petroleum products by 5 per cent. They should help us reduce the burden on common man," petroleum minister ram Naik told reporters here, adding that consumers would have to bear one-third of pool deficit through increased prices.

Stating that states had windfall gains due to the upsurge in global crude prices for the past one-and-a-half years, he said the issue came for discussion during the Cabinet and NDA meeting where he was asked to approach states for their contribution at this difficult time.

He said the government would pass on to consumers only one-third of the Rs 23,600 crore oil pool deficit by raising prices of petrol, kerosene, LPG, diesel and ATF by the month-end while making up for the rest by cutting duties and floating oil bonds.

"We will pass on only one-third burden (about Rs 8,000 crore) to the consumers," Petroleum minister ram Naik told reporters while ruling out a roll-back in prices after the announcement in the next few days.

"We will consider all the aspects while raising prices of products.... Rolling back doesn’t give credit to the government," he said when asked if the centre would substantially hike prices and then roll back a part of it.

Stating that the finance ministry was expected to mop up about Rs 41,000 crore from excise and customs as against the budgetary target of Rs 27,000 crore during 2000-01 on account of the spurt in global crude prices, Mr Naik said the finance minister agreed to cut duties to pass on some of the surplus accrual.

The formula for mitigating the Rs 23,600 crore pool deficit during the current fiscal on the presumption that crude prices would average $ 30 a barrel was evolved at a meeting of the secretaries in the Prime minister's office, and finance and petroleum ministries after Mr Naik was authorised by the cabinet and the national democratic alliance to take appropriate steps.

Asked for delays in the announcement of price hike despite he getting the mandate from the cabinet and NDA, Mr Naik said that the Finance ministry would need some time to work out the exact deduction in excise and customs on various petro-products and crude oil.

Likewise, the petroleum ministry would first have to work out the hike in ex-depot prices of products and then the new duties would have to be adjusted for final consumer prices and the exercise would take some time, he said and emphasised that the price hike would be announced before September 30.

Stating that government had increased diesel prices last time in October, 1999, when world crude prices were ruling at about $ 24 a barrel, Mr Naik said price rise had become inevitable due to oil prices shooting to $ 36 a barrel now.

He said the rupee had also depreciated, thus contributing significantly to the oil pool deficit, and added that all these factors would be kept in mind while implementing the three-pronged strategy.

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