LPG, kerosene, freight subsidy may continue

Subsidy burden on oil PSUs expected to go up with the increase in international crude prices.

The petroleum ministry has indicated that subsidies for the sale of cooking gas, PDS kerosene and for concessional freight offered to petroleum products in far-flung areas may continue.

"Till the prices of liquefied petroleum gas and PDS kerosene become market-driven, the subsidy sharing between various stake-holders and the freight subsidy may have to continue," the ministry said in its Outcome Budget for 2006-07.

The Outcome Budget has indicated that the subsidy burden on oil PSUs is expected to go up commensurate with the increase in international prices.

This is in contrast to the recommendations made by the C Rangarajan Committee on overhauling pricing and duty structure for the sector. The committee had said subsidised kerosene should be limited to below-poverty-line households only.

In addition, it had wanted the subsidy on cooking gas to be phased out with an immediate increase in price by Rs 75 per cylinder. It had also suggested that the freight-equalisation be removed. The government is looking into the recommendations.

A significant outcome projected for the year is making the Petroleum and Natural Gas Regulatory Board functional for overseeing functioning of the refining and the retail sector.

A Bill to enable setting up of the board was passed by the Rajya Sabha and has been tabled in the Lok Sabha in the Budget session. The oil ministry also expects that project structure and framework agreement for the Iran-Pakistan-India pipeline will be finalised during 2006-07.

In terms of initiatives of public sector undertakings, ONGC Videsh is expected to drill about 55 exploratory wells, 66 development wells and produce 4.728 million tonne of crude and 4.48 million cubic metres per day of natural gas during 2006-07.