Even a year after the dismantling of the Administered Pricing Mechanism (APM) in the petroleum sector, the oil pool account continues to exist, albeit in a different form. The account, which would normally show a deficit previously, now shows a surplus.
The oil pool account, which was a complex mechanism evolved by the government to cross-subsidise petroleum products during the APM period, has now been replaced by one which is made up of funds coming through cess, surcharge and increased excise duty on petroleum products.
The then finance minister, Yashwant Sinha, while announcing the dismantling of APM from April 1, 2002, had doubled the cess on crude oil from Rs 900 to Rs 1,800 a tonne.
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The 8 per cent excise duty on LPG, kerosene and auto CNG was replaced by 16 per cent CENVAT and a surcharge of Rs 6 a litre on petrol was introduced.
While the revenue raised from the doubling of cess on crude oil is expected to go to the Oil Industry Development Fund, the other two levies could have been imposed keeping in mind the continuing subsidy on liquefied petroleum gas and kerosene sold through public distribution systemwhich the government has to meet from the general Budget.
The revised estimates for the current fiscal show that the government is likely to mop up Rs 6,550 crore only through surcharge of Rs 6 a litre on petrol during the current fiscal.
The outgo on account of subsidy on petroleum products comes to Rs 6,265.43 crore implying that the government mopped up Rs 285 crore more than what it spent on petroleum subsidy only from one surcharge.
Industry sources point out that if the revenue generated from other duties and cess imposed in the last Budget on petroleum products is taken into account, the additional resource mobilisation from the oil sector could be 20 per cent more than what the government spent on subsidising PDS kerosene and domestic LPG.
LPG prices to go up by Rs 30
With Budget 2003-04 failing to provide sops in the form of reduced duties and increased subsidy on petroleum products, domestic oil marketing companies have started pushing for an increase in the retail prices of domestic liquefied petroleum gas (LPG) and kerosene sold through public distribution system (PDS), reports Our Energy Editor.
The price hike, which is expected this week, is likely to be between Rs 20-30 a cylinder of LPG. In the case of PDS kerosene, while the oil companies are demanding at least Re 1 a litre hike in its price, the actual increase in the prices of this politically-sensitive cooking fuel will be decided by Petroleum Minister Ram Naik in consultation with senior members of the Cabinet.
Though the state-run domestic oil marketing companies have been pressing the petroleum ministry for a hike in the prices of these two susbsidised petroleum products, they were told to wait till the Budget.
Oil companies, reeling under the impact of the increase in international prices of crude oil and petroleum products, had expected the government to raise retail prices and provide them relief.
Oil PSUs have together lost about Rs 3200 crore during 2002-03 on selling domestic LPG and PDS kerosene below their cost.
The subsidy of Rs 67.75 per cylinder provided this fiscal is less than half the Rs 160.05 per cylinder gap between the artificially suppressed domestic retail price of Rs 241.20 in Delhi and the actual average cost.
Similarly, in the case of PDS kerosene, its existing sale price in Delhi is Rs 9.01 a litre, while subsidy is Rs 2.45 a litre and its actual cost as per international prices is Rs 16.54 a litre, leaving a gap of Rs 5.08 a litre to be borne by the oil companies.