Govt to phase out subsidies on kerosene, LPG by 2006
The Government on Friday said that it would phase out subsidies on kerosene and LPG by 2006, reversing an earlier decision to limit subsidies to 33 per cent and 15 per cent respectively from April 2002.
This would imply that the price of these two products would not be enhanced substantially at one go. The decision to extend the time frame for phasing out subsidies by another five years was taken at Friday's meeting between the Finance Minister, Mr Yashwant Sinha, and the Petroleum Minister, Mr Ram Naik.
A proposal on this would be taken up for Cabinet approval shortly.
If the Government were to implement its earlier decision to limit the subsidies on LPG and kerosene to 15 per cent and 33 per cent respectively, it would have meant a steep increase of close to Rs 90 per cylinder and Rs 1.25 per litre of kerosene. Subsidies on these two products account for over Rs 12,000 crore annually, according to estimates.
Ram Naik said that the prices of both petrol and diesel would be freed of all controls from next fiscal. The Minister ruled out lowering subsidies to the level decided by the Union Cabinet in 1997. A clear picture on the change in prices would be known when the Finance Minister presents the Budget.
While the subsidy element for kerosene is 42 per cent, that of cooking gas is 40 per cent. Post-APM, subsidies would be directly paid to the oil companies.
He said that only the State-owned oil companies would continue to distribute products to the PDS segment. The subsidy would be calculated on a monthly average basis and paid within 45 days of the oil companies making a claim.
The deregulation of the petroleum sector was on track, he said while adding that the APM would be dismantled by March 31, 2002 and a regulator for the downstream would be in place for administering the free market regime.
