Wednesday, January 28, 2009

ET Bureau: Govt may cut petrol price by Rs 4 & diesel by Re one a litre

The Cabinet Committee on Political Affairs is likely to meet once foreign minister Pranab Mukherjee is back in the country.

The crucial decision over fuel price revision is expected to be taken up at the CCPA meeting today. As per the options being weighed by the government, consumers can look forward to a reduction of Rs 4 a litre in the case of petrol and about a Re one a litre in the case of diesel.

Congress president Sonia Gandhi has also indicated that the UPA government would reduce fuel prices soon which could also have a sobering effect on inflation.

“The profit margin in petrol is about Rs 7 a litre and diesel is about Rs 3 a litre. Restoring the duties, about 90 paise Customs duty and Re 1 excise, would further squeeze the margin by about Rs 2 a litre on the two fuels. After providing some cushion to partly subsidise retail sale of cooking gas and kerosene, there may not be much scope for a steep price cut,” a person in the know, who wished not to be identified, said. Officials in the Planning Commission, petroleum and finance ministries are involved in the issue of pricing of petroleum products.

Another option is to effect price cuts without restoring Customs and excise duties, he said. “This would reduce pump prices of petrol by Rs 7 a litre and diesel by Rs 3 a litre. However, finance ministry is not willing to forego Rs 5,600-crore revenue at the end of current fiscal when it has to make provisions for various social sector programmes,” he said. On June 4, the government had announced reduction in Customs duty on petrol and diesel from 7.5% to 2.5%. Excise duties on unbranded diesel and petrol were also reduced by Re l a litre.

According to another official, the option of freeing pump prices of petrol and diesel from the government control is also on the table. “Some decision makers are of the view that prices of petrol and diesel should be deregulated now. There are others who wants it to be done after the Parliamentary elections. It is a political decision and no one can pre-judge the CCPA decision,” he said on condition of anonymity. “However, deregulation of auto fuel pricing is certain, now or after three-four months,” he added. According to him, the proposed deregulation would benchmark pump prices of petrol and diesel with international rates, as in the case of aviation turbine fuel (ATF).


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