Bid to restrict subsidised LPG use
New Delhi, May 8: The government plans to restrict subsidised domestic LPG cylinders to six per household every year.
For additional cylinders, consumers will have to pay the market price. Data show 65-70 per cent of households use 5-6 cylinders (14.2 kg) a year, while the remaining use more.
In Calcutta, PSU oil marketing firms suffer a loss of Rs 329.73 by selling an LPG cylinder at Rs 365.10.
A senior oil ministry official said the proposal to restrict the number of cylinders per year would be put up before the empowered group of ministers, headed by finance minister Pranab Mukherjee, scheduled to meet on Wednesday.
The panel will consider the amount of diesel price hike and give its consent to state-owned oil firms to raise petrol prices, which have been deregulated.
Sources said the oil ministry would seek a hike of Rs 3 per litre for diesel and Rs 50 for an LPG cylinder. PSU firms are likely to hike petrol prices by about Rs 3 a litre.
Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd lose Rs 16.17 a litre on diesel, Rs 28.28 a litre on kerosene and Rs 329.73 per domestic LPG cylinder.
A hike of around Rs 8.50 per litre will align petrol prices with international rates, but the entire burden will not be passed on to consumers at one go.
“Oil companies will be asked to stagger the hike over a couple of months,” the official said.
The state-owned oil firms are projected to lose Rs 177,500 crore from selling fuel if retail prices are not raised.
The RBI has called for an immediate hike in petrol and diesel prices even if it adds to inflationary pressure and moderates economic growth as the artificial capping of prices will increase the government’s fiscal deficit.
Officials said global oil prices had fallen in the past few days but were still above the comfort zone. The volatility indicated an uncertain global geo-political situation and economic recovery.
Goldman Sachs, which had forecast the dip in crude prices of the past few days, said prices could surpass its recent highs by 2012 as global oil supplies continued to tighten.
Officials said the LPG cylinder quota is the first step towards the market pricing of cooking gas.
They said with the spread of city gas network to over 150 cities by 2014, pressure on domestic cylinders would come down.
According to the Kirit Parikh committee report on fuel pricing, the subsidy burden will keep increasing with the growth in LPG consumption and a spike in global rates.
The panel has recommended a hike in the price of each cylinder by at least Rs 100 and a periodical revision of the rate based on per capita income. For BPL households, it has recommended subsidy in the form of direct cash transfers.
The government in mid-February had constituted an inter-ministerial task force under Unique Identification Authority of India chairman Nandan Nilekani to evolve mechanisms to provide direct subsidies on kerosene, LPG and fertilisers to intended beneficiaries.
The task force was asked to submit its interim report within four months of its constitution. The recommendations of the report will be implemented on a pilot basis by the concerned ministries in the following six months.
In 2010-11, the three PSU oil retailers lost Rs 78,061 crore, but so far the government has provided only Rs 20,911 crore in compensation. In 2008-09, the government had issued oil bonds worth Rs 71,292 crore to the three firms to make up for more than two-thirds of the revenue loss. Upstream oil firms such as ONGC had provided another Rs 32,000 crore.
The government had in June last year freed petrol pricing and state-run firms had on seven occasions changed rates in line with international prices before deciding in the second half of January to freeze rates because of assembly elections in five states, including Bengal, Kerala and Tamil Nadu.
Source: The Telegraph