FM, Aiyar to call on PM on fuel prices

Finance Minister P Chidambaram and Petroleum Minister Mani Shankar Aiyar may soon meet Prime Minister Manmohan Singh to decide on fuel pricing in the wake of spiralling international oil prices.

Although yesterday's meeting between finance and petroleum ministry officials failed to arrive at a decision on revising fuel prices, sources said the two ministers might shortly meet the Prime Minister to take a final view on whether duties need to be cut or petrol and diesel prices need to be raised.

The petroleum ministry is seeking a Rs 2.50 per litre hike in petrol prices and Rs 1.30 per litre increase in diesel after the finance ministry expressed reservations on cutting duties on petroleum products.

Oil ministry is of the opinion that the Rs 2.20 per litre hike in petrol and Rs 1.06 a litre in diesel prices necessitated by increase in duties and the additional cost for producing cleaner fuel (Rs 0.30 a litre on petrol and Rs 0.24 per litre on diesel) should be passed on to the consumers.

The cut in Customs duty in the Budget is expected to erode Rs 5,460 crore in revenues on account of crude oil imports, and Rs 390 crore for LPG and kerosene.

The government also stands to lose Rs 2,140 crore on slashing excise duty on LPG and kerosene in the Budget. Besides, it stood to lose Rs 1,100 crore on CVD/AV (assessable value).

Against this, the government estimates a gain of Rs 8,961 crore from increase in excise duty on petrol and diesel.

So, the entire exercise was revenue neutral, sources said. The finance ministry's assumptions of revenues were based on a crude price of $38 per barrel till January.

However, the average price of global crude prices was at $49.27 a barrel, sources said adding "so, the finance ministry will gain more than they lose."

Besides this, the increase in road cess would fetch another Rs 3,116 crore in 2005-06.

Increased duties and spiralling crude prices warrant a Rs 5.26 per litre increase in diesel and Rs 5.77 a litre hike in petrol prices, without which public sector oil firms stand to lose Rs 2,400 crore per month.