Oil bonds to ease subsidy burden proposed

New Delhi, March 23 | Updated: Mar 24 2006, 05:30am hrs
Petroleum minister, Murli Deora has proposed issuance of fresh oil bonds in 2006-07 to cover the complete subsidy burden on oil companies on the four controlled products including petrol, diesel, kerosene and LPG.

The under-recoveries of the oil companies for 2005-06 stand at a whopping Rs 39,600 crores. This is after excluding the Rs 2,900 crores provided for kerosene and LPG through the Budget.

An internal note of the petroleum ministry reads, During 2005-06, the oil companies are being issued oil bonds for Rs 11,500 crores. A similar provision for the subsidy given by the oil companies needs to be provide during 2006-07.

Advocating for complete transparency in meeting subsidies through the Budget, the minister is also game for implementing the recommendations of the Rangarajan panel in full including raising the LPG prices by Rs 75 a cylinder.

It is suggested that all the recommendations of the Rangarajan committee may be implemented in full. As the implementation may take some time, the subsidy borne by the oil companies need to be transparently met from the fiscal budget during the interim period, the note further said.

The minister had earlier gone on record saying that the entire subsidy on the four sensitive petroleum products be provided by the fiscal budget on similar basis as followed for food and fertilisers. An amount of Rs 24,000 crore plus has been allocated by the government towards meeting the food subsidy while Rs 17,000 crore plus was kept aside for meeting the fertiliser subsidy burden.

The Rangarajan panel had also recommended raising cess on crude oil by another Rs 3,000 per tonne for funding the subsidy on kerosene and LPG.

Dr Rangarajan Committee has also recommended that the rate of cess can be increased by another Rs 3,000 per tonne, and the entire cess be utilised to fund the subsidy on petroleum products from the fiscal budget.

Therefore, the entire proceeds of the cess should be utilised for funding the petroleum subsidy, the petroleum ministry note reads.