The government is set to increase prices of domestic liquefied petroleum gas (LPG) and kerosene immediately after the last phase of the ongoing Assembly elections.
The petroleum ministry sources said the price increase may be announced on the evening of February 22 itself when the last phase of Assembly elections is over.
This will be in tune with the pattern set by the BJP-led government for announcing petroleum price increases. The last increase in prices of high speed diesel (HSD) was also affected on the evening of October 5, 1999 _ just after the last phase of general elections was concluded.
Ministry sources conceded that the government had been delaying raising the prices of domestic LPG and kerosene sold through public distribution system (PDS) because of the Assembly elections. LPG and PDS kerosene prices being politically sensitive issues, the government wanted to avoid the Opposition making political capital out of increased prices.
The petroleum ministry has been keen on cutting down on the subsidy of these two petroleum products. While the annual outgo on kerosene subsidy is Rs 8,000 crore, it is Rs 4,000 crore in the case of domestic LPG.
The ministry has been arguing that the subsidised kerosene does not reach the poor people but is being increasingly used for adulteration of HSD. Therefore, the government is inadvertently ending up subsidising diesel adulteration, according to the ministry.
Last month, the petroleum ministry had made a presentation to Prime Minister Atal Bihari Vajpayee, making out a strong case for a hike in LPG and kerosene prices.
The ministry had placed two options before the Prime Minister_one that would raise the basic price of PDS kerosene by 69 per cent and 285 per cent, and another for domestic LPG, that would hike the basic price of a cooking gas cylinder by
54.45 per cent.
Regarding PDS kerosene, one option was based on the reduction in subsidy as per the schedule drawn up for complete deregulation in the oil sector, which has been approved by the Cabinet. The other option concerned complete removal of kerosene subsidy.
Under the first option, the basic price of PDS kerosene will go up by 69 per cent from Rs 2 a litre to Rs 3.38 a litre. In the second option, the basic price of PDS will move up by a whopping 285 per cent from Rs 2 a litre to Rs 7.70 a litre.
According to the petroleum ministry, in case the government accepted the first option, PDS kerosene prices in Delhi would move up from Rs 2.59 a litre (before the January 15 sales tax rationalisation) to Rs 4.12 a litre, and in Mumbai from Rs 2.67 a litre to Rs 4.17 a litre.
In case the second option is adopted, PDS kerosene prices in Delhi would go up from Rs 2.59 a litre (before the January 15 rationalisation of sales tax) to Rs 8.87 a litre, and in Mumbai from Rs 2.67 a litre to Rs 8.83 a litre.
Regarding domestic LPG, the petroleum ministry has proposed that the basic price of an LPG cylinder be raised from Rs 124 to Rs 191.53. This would reduce LPG subsidy by 33 per cent as approved by the Cabinet in the oil deregulation schedule. This will increase LPG cylinder price in Delhi from Rs 146.15 (before the January 15 sales tax rationalisation) to Rs 220.75, and in Mumbai from Rs 149.60 to Rs 225.05.
