Rejigs duties to help oil companies; kerosene prices raised by Rs 2 per litre.
The government today announced a 9-20 per cent increase in prices of diesel, liquefied petroleum gas (LPG) for domestic use and kerosene sold under the public distribution system.
Simultaneously, it removed the 5 per cent Customs duty on crude oil, brought down the import duty on petrol and diesel from 7.5 per cent to 2.5 per cent and reduced the excise duty on diesel by Rs 2.6 to Rs 2 per litre.
The duty changes, approved at a late-evening meeting of the empowered group of ministers, would result in an annual revenue loss of Rs 49,000 crore for the exchequer (of which Rs 26,000 crore is on account of the Customs duty changes and Rs 23,000 crore on account of the excise duty cut).
The price increase will bring down the losses of the government-controlled oil marketing companies (OMCs) by Rs 21,000 crore. The oil companies will gain Rs 23,000 crore from the excise duty cut.
These, along with lower Customs duties on petrol and diesel, will help the companies bring down their annual losses by Rs 51,140 crore to Rs 120,000 crore. Without the price increase and the duty changes, the OMCs’ total losses for the current year would have crossed Rs 1.71 lakh crore. International crude oil prices have increased by 48 per cent since June 2010.
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Today’s decision, which came after a gap of one year, raised prices of diesel and kerosene by Rs 3 and Rs 2 per litre, respectively, and those of cooking gas by Rs 50 per 14.2-kg cylinder.
Announcing these decisions after the meeting, Petroleum and Natural Gas Minister, S Jaipal Reddy told reporters that the increase was “very modest and minimal”.
“It is hoped that the state governments will also reduce state levies to a corresponding extent,” he said.
The decrease in Customs duty on petrol will eliminate the need for a further price increase. “There will be no need for us to enhance petrol price and the difference (Rs 1.98 per litre) between existing and desired prices will be wiped out with this change in duty,” he said.
Even after this round of price increases, the price of LPG in India is less than that in other neighbouring countries (see chart). Similar is the case for kerosene. In diesel, too, the domestic price is less than that in Pakistan and Nepal, though more than in Bangladesh and Sri Lanka. In spite of today’s increase, the OMCs will have to bear an under-recovery of Rs 6.22 per litre of diesel, Rs 24.566 per litre of kerosene and Rs 331.14 per LPG cylinder. When asked about the remaining Rs 120,000 crore under-recovery of the OMCs — Indian Oil, Hindustan Petroleum and Bharat Petroleum — Reddy said, “We will have to watch international prices. We do not have big options with us but we will look at other devices,” he said.