Days after raising petrol and diesel prices, the government today announced setting up of an expert group on pricing of petroleum products.
"Government will set up an expert group to advise on a viable and sustainable system of pricing petroleum products," Finance Minister Pranab Mukherjee said while presenting the Budget for 2009-10 fiscal in Parliament.
The details of the expert group were not announced.
In a boost to use of environment-friendly bio-fuels, he fully exempted petrol and diesel blended with bio-diesel obtained from vegetable oils from excise duty.
Currently, petrol attracts a basic central excise duty of Rs 5.35 a litre plus Rs 6 a litre special additional excise duty. Diesel on the other hand an excise duty of Rs 1.60 per litre.
"In order to encourage the use of this environment- friendly fuel and augment its availability in the country, I also propose to reduce basic customs duty on bio-diesel from 7.5 per cent to 2.5 per cent, at par with petrol and diesel," he said.
India is dependent on import of crude oil to the extent of about 75 per cent to meet domestic requirements of petroleum products. Rising international oil prices had forced Rs 4,870 crore per month revenue loss on Indian Oil, Bharat Petroleum and Hindustan Petroleum on sale of petrol, diesel, domestic LPG and kerosene.
To cover this revenue loss, the retail prices were required to be increased by Rs 6.94 per litre on petrol, Rs 4.11 a litre on diesel, Rs 96.68 per cylinder on domestic LPG and Rs 16.01a litre on PDS kerosene. The Government, however, on July 1 raised petrol price by only Rs 4 a litre and diesel by Rs 2 per litre.
The price increase would help the three firms reduce their revenue loss by about Rs 13,000 crore during 2009-10. Even after this increase, oil PSUs are projected to suffer a burden of around Rs 27,000 crore on the sale of petrol and diesel in 2009-10 and hence the need for a proper pricing policy.
While the Government did not increase the retail prices of kerosene and LPG, ways have to be found to meet the Rs 30,000 crore revenue loss on the two cooking fuel.
