With international crude oil prices touching $96 a barrel, the government has pressed the panic button. In fact, petroleum minister Murli Deora met finance minister P Chidambaram on Thursday to discuss measures to cope with the record crude oil prices and later is also believed to have briefed Prime Minister Manmohan Singh of the likely impact. The Indian basket of crude oil is also expected to have touched $86 a barrel, thereby widening revenue losses of public sector oil firms by Rs 7,000 crore.
After having exercised the option of issuing oil bonds to PSU oil marketing firms, the government is left with only two choices. One is to increase the consumer prices of petrol and diesel and the other is to reduce taxes and duties on petrol and diesel, as they contribute almost 35-40 % each of the existing prices.
In its meeting with the FM, Deora is learnt to have pressed for an excise duty cut of Rs 2 per litre on petrol and Re 1 a litre on diesel to offset the rise in revenue loss on sale of petrol, diesel, domestic LPG and kerosene to Rs 61,840 crore.
A one rupee a litre cut in excise duty on petrol would give Rs 552.5 crore during the remainder period of the fiscal while the same on diesel would garner Rs 2,113.4 crore. The oil ministry has argued that increased realisation from customs duty on crude oil because of higher value of imported goods, can be used to reduce excise duty on petrol and diesel.
?We came here to discuss solutions (to high oil prices),?Deora said after meeting Chidambaram, but declined to give details. He also did not say by when a decision on his ministry?s proposals would be taken. ?Oil prices have gone up so much… we need to urgently find a solution,? Deora said.
The government, sources said, was still not very keen on raising fuel prices for the fear of a public backlash in a year when crucial states like Gujarat go to polls. Besides, the standoff over the nuclear energy deal with the US has also raised the risk of early general election.