Rangarajan for Rs75 hike in LPG, Rs1.2 in petrol

Also recommends cutting customs duty on petrol & diesel to 7.5%.

The Rangarajan Committee report on pricing and taxation of petroleum products has called for a hike of Rs 75 per LPG cylinder, Rs 1.21 a litre in petrol and Rs 1.96 a litre in diesel. This is against a required increase of Rs 1.67 a litre in petrol and Rs 2.65 a litre in diesel in Delhi.

The report also suggests a shift towards a trade parity price, removal of freight equalisation and reduction of Customs on petrol and diesel to 7.5 per cent. It also suggests a shift towards a specific duty structure and gradual increases in the cooking gas price till the entire subsidy is eliminated.

The report also recommends restricting the PDS kerosene subsidy to below poverty line families only and the use of debit cards and cash vouchers for the scheme. It suggests a shift from the current mix of specific and ad-valorem levies to a pure specific levy of Rs 5 per litre on diesel and Rs 14.75 per litre on petrol.

The committee also said the trade parity price (weighted average of import and export parity price in the ratio of 80:20) should be taken as a ceiling within which oil companies should be given freedom to fix retail prices, without any interference from the government. The report says the issuance of oil bonds to the oil marketing companies raises fiscal concerns.

It also calls for discontinuing the practice of upstream assistance provided by ONGC, GAIL and OIL. Instead, it has proposed increasing the Oil Industry Development Board cess to Rs 4,800 per metric tonne (MT) from Rs 1,800 MT at present.

The committee has urged the government to implement its recommendations at the earliest. Petroleum Minister Murli Deora, who received the report, has reacted with caution.

"It will be my endeavour to ensure that the common man continues to be able to get household fuels like PDS kerosene and domestic LPG at affordable rates," he said.

The government will now examine the report and some inputs may be incorporated in the forthcoming Budget.

"The recommendations should be enforced in one go. A piecemeal implementation will not yield sustainable results," Rangarajan said after presenting the report to the petroleum minister.