New Delhi, Dec 24: The diesel price hike for this quarter is officially off. The impending increases in kerosene and LPG prices, following a partial rollback of the subsidy, also seems to have been put off till the Budget.The petroleum ministry, which was expected to align high speed diesel prices with the jumping global rates on December 5, has written to the finance ministry instead, asking for a import duty cut on crude oil. Sources in government say a 5 per cent cut in the import duty on crude would compensate for an increase in the basic price of diesel, most of which is refined within the country.
Diesel prices have shot up by more than $20 a tonne in the international market, since the last price hike effected at home on October 6. Union petroleum minister Ram Naik admitted at a press meet on Friday that the Cabinet decision of September 1997 had provided for aligning domestic prices with global rates every 60 days.
He did not say that he would abide by that decision, though. He said he would await a response from North Block for reducing duties at Budget time. "If I have an assurance from the finance minister I can adjust my accounts," Naik said, implying that the duty reduction could set off the increase in the basic price of the fuel.
The retail price of diesel (Rs 13.91 a litre in the Capital) is inclusive of 30 per cent customs duty, 16 per cent excise and sales tax, over the ex-storage point price of Rs 9.63 a litre. The import duty on crude oil is 20 per cent. Naik pointed out that North Block's budgetary estimates of revenue collection from diesel of Rs 2,300 crore had been overshot many times and was likely to be Rs 7,000 crore after the tremendous increase in oil prices. In the West Asian market, diesel prices have shot up from $162 a tonne f.o.b. (free on board) since September to $182.38 a tonne f.o.b this week.
The petroleum minister said crude oil prices, which had gone up by 119 per cent between March and October (when diesel prices were last increased), were 160 per cent higher now. Crude prices are hovering around $24 a barrel in West Asia and $25 a barrel in the North Sea, compared to the March prices of roughly $11 a barrel. Naik said crude prices had shot up to Rs 7832 a tonne from Rs 3010 a tonne in October. At the Economic Editors' Conference last month, the petroleum minister had hinted that diesel prices would come up for review by December 5, or 60 days since the last hike on October 6.
Petroleum ministry has obviously undergone a change of heart since then. The current thinking seems to be that the lower duty component in the retail price of diesel could compensate for a hike in the basic price, which is linked to global rates.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.