Defending the recent petrol price rise, Finance Minister Pranab Mukherjee said on Saturday the states took a major share of the tax pie from petroleum products.
Yesterday, the UPA's second-biggest ally Trinamool Congress' chief Mamata Banerjee threatened to withdraw support to the Centre after petrol prices were raised for the 10th time since last June. This was followed by Prime Minister Manmohan Singh defending the decontrol of petroleum prices.
However, Banerjee softened her stand on Saturday by asking for a Rs 1,000-crore fund to develop an international cultural complex, named Tagore Cultural Complex, including Nandan and Rabindra Sadan; thereby indicating that she might not take any hasty decision.
Mukherjee said the empowered group of ministers, which decides on the crude prices, consists of all political parties, including the allies. Citing reasons for the rise, he said, “Oil marketing companies have given adequate reasons as to why they have to do it. The combined losses that both Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd have incurred in the first six months are around Rs 12,000 crore. And Indian Oil Corportation is also facing problems. If they are in the red, would they be able to import the crude required for the country?”
The annual crude requirement of the country is more than 106 million tonnes, while the production is around 34 mt. The rest is imported.
Supporting the decontrol, he said, “In principle, a decision was taken in respect of diesel, too, but we decided not to increase its prices. Therefore, only petrol prices were increased and that, too, because it was deregulated and it did not happen today.” The decision to deregulate petrol prices was taken on June 28, 2010.
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He also indicated that the subsidy for crude will also be higher, above 68 per cent, this financial year. In 2010-11, the under recovery of oil companies was Rs 78,190 crore, when the average oil prices was $85 per barrel.
“Today the average price is $110 per barrel. Therefore, the under-recovery will be Rs 1,32,000 crore,” Mukherjee said, adding that the government was aware of resentment among political parties.
Taking a dig at the state government’s, including the Banerjee-led West Bengal, he said. “One third of the taxes the Centre collects from petrol, goes to the states according to the finance commission formulations. In a year, the taxation from petroleum items that the Centre got was Rs 96,000 crore while states collected Rs 84,000 crore. Later, the Centre's part was reduced to Rs 64,000 crore, when the states got that additional money.”
He noted that TMCs concerns were “legitimate” and said whenever there was a price rise these kinds of reactions were natural, “as they (the states) might not listen to economic reasons” such as deregulation and crisis faced by oil companies.
‘PRIVATE PLAYER SHOULD BE ALLOWED’
The government should allow more private companies in the oil sector to bring down prices in the long run, said Kaushik Basu, chief economic advisor in the finance ministry, on Saturday.
Earlier, Basu had spoken in favour of decontrolling diesel prices to ease out its prices in the long run.
“If you allow more private sector companies, in the long run, prices will come down,” he said. On being asked if the government was thinking of lowering taxes, he said, “When global prices rise, it is a signal to the economies. It is not a good idea to hold prices by providing subsidies. So, the decontrol of prices was called for,” said Basu. If diesel prices were deregulated, in the medium term, prices should come down, he added.