Fuel prices hiked
Prices of petrol and diesel have been increased with effect from Monday midnight. Petrol becomes expensive by Rs 2.50 and diesel by Rs 1.50.
In reponse to the price hike the Finance Minister, Yashwant Sinha, reduced excise on both petrol and diesel by 2 per cent with a view to combating the effects of hardened global oil market. The duty on petrol is down to 30 per cent from 32 per cent and that of diesel from 16 to 14 per cent. The Finance Ministry will also pay oil companies the Rs 2,000-crore burden that they inflicted in the last two months.
Post APM, the oil companies have been telling the Government that due to price rise in international markets it would be difficult for them to maintain a low price range at home. The Government bought time from the companies and assured the companies of excise rollback. Ram Naik said that the compensation package would either be in the form of oil bonds or direct cash.
The oil companies would revise the prices of petrol and diesel on a 15-day basis. To insulate consumers from price volatility, the Government would take up a quarterly review of the sector.
The prices of petrol and diesel will apply in States with sales tax on petrol at 25 per cent and diesel at 20 per cent. In Delhi, the revised price of petrol will be Rs 28.94 (Rs 2.40 hike plus 20 per cent sales tax). For diesel, the revised price would be Rs 17.99 (Rs 1.40 plus sales tax of 12 per cent).
Consumers in Mumbai would be the hardest hit among the four metros due to very high sales tax rates and would now have to pay Rs 33.47 for a litre of petrol, which is Rs 2.69 more than the present price, while diesel would cost them Rs 22.85 against Rs 21.10 per litre now.
Kolkata would have a price tag of Rs 29.39 (as against Rs 26.99) for petrol and Rs 18.38 (Rs 16.97) for diesel, while Chennai customers would have to pay Rs 31.05 (Rs 28.49) and Rs 19.63 (Rs 18.10) for the two fuels respectively.
Ram Naik said from now onwards there would be 'automatic adjustment' as the oil companies have agreed to revise prices every 15 days and thanked the oil PSUs for not hiking the selling prices till now despite the burden on their finances, which the Government would compensate now.
He said that the oil companies can either be given bonds or cash. And also added that the Finance Ministry would decide on it in consultation with Petroleum Ministry.
Ram Naik had two rounds of discussion with Prime Minister Atal Bihari Vajpayee after detailed deliberations with Finance Minister Yashwant Sinha to work out details of the excise adjustment, which would be revenue neutral, and subsequently held talks with oil companies on Monday on the quantum of price increase.
Oil companies would make further adjustments, upward or downward, on fortnightly basis with the changes in the refinery gate prices which are fixed in line with international oil prices. At the same time, the Government would review the price situation every quarter to make adjustment in excise duty in case Government is garnering more revenue, it will share some of it; if it is losing revenue, then it can get more.
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