The ballooning oil pool deficit currently ruling at Rs 19,000 crore is likely to be absorbed by the government into its own account in two phases. A sum of Rs 9,000 crore, which is equivalent to this years payment, will be absorbed during the current fiscal; the previous outstanding of Rs 15,500 crore will be absorbed over a time-frame of three to five years. This is likely through the issue of bonds which would be redeemed in a phased manner.
The government will have to resort to an innovative fiscal doctoring, ministry sources admitted. At the heart of the scheme, which is now being considered by the finance ministry, is the recommendation of the Arjun Sengupta Committee. The recommendations of the committee were scheduled to come up for discussion at a meeting of the United Fronts steering committee on July 2, which was however subsequently postponed.
Ministry sources, however, said that the absorption of Rs 19,000 crore oil deficit indicated by the PM was subject to clearances from the steering committee.
During the current year, a portion of the Rs 9,000 crore amount to be absorbed this year will be offset through a petro-goods price rise while the remaining will probably be absorbed into the budget as deficit. Prime Minister I K Gujral had indicated during his interview with Doordarshan on Thursday that although the government was willing to bear the burden of the oil pool deficit, future subsidies on LPG and diesel would be wiped out by raising the prices of these two products. He, however, ruled out a further increase in petrol prices in the interview.
The oil pool account had originally been conceived on the basic premise that the subsidies in the LPG and diesel prices would be covered by the prices of petrol. But over time, this scheme of cross-subsidisation had failed since the subisides on diesel and LPG had grown to such an extent that the petrol price was unable to bridge the gap.
The ministries of finance and petroleum had been at loggerheads on the approach to be taken with the latter demanding the return of about Rs 3000 crore being appropriated by the former in the past instead of opting for the price hike route. The finance ministry had argued that this appropriation was notional and could have been adjusted in the very same year but not after so many years.
However, with a new UF government in power, the Left parties too had entered the fray and had demanded that the burden of the oil pool deficit should not be passed on to the public. Instead, it had suggested alternative means of bridging the gap.
The Congress party has also threatened to withdraw support if the government raises petro-goods prices while the BJP, which is in the Opposition, has been critical of the move.
