No fuel price hike for now, GoM to meet again

NEW DELHI, JANUARY 17: After chickening out on raising the ration price of wheat and rice, the Group of Ministers failed to muster courage to recommend an increase in petrol and diesel prices by Rs 2 and Re 1 per litre, respectively.

The GoM, which was formed before the poll debacle in Gujarat and Himachal, on Thursday decided not to change the present public distribution system for foodgrain even though its chairman Pranab Mukherjee favoured removing families above the poverty line from the state-run scheme.

Finance Minister P Chidambaram argued for an increase in the PDS issue price of wheat and rice by Re 1 per kg for all beneficiaries—above and below the poverty level, but other ministers opposed any change for fear that 2008 could be an election year.

The Food Ministry had proposed that APL families be either removed from PDS or their ration quota be reduced to 10 kg per month from the present 35 kg. The other option was to raise the ration issue price for APL families to 70 per cent of the economic cost through annual increase of Re 1 per kg every year.

The GoM’s resistance to increasing the burden on the common man continued when it met again in the evening to consider specific proposals from the Petroleum Ministry to cut losses of state-run Oil marketing companies. The ministry narrowed down the option before the GoM to “neutralising the last price decrease in February 2007” by raising prices of petrol by Rs 2 and of diesel by Re 1 a litre. “This would restore the price of petrol and diesel ex-Delhi to Rs 45.52 and Rs 31.48 per litre respectively,” it said.

But some members tried to play it down saying there was “no need for a change at this stage”. Chidambaram, on the other hand, opposed the ministry’s proposal of a reduction in customs duty on crude oil and petro-products and cuts in excise duty on petrol and diesel. He has asked for clarity in the figures submitted by the oil ministry on the under-recoveries of the OMCs, said sources.

The GoM is to meet again in a couple of days as Thursday’s meeting remained inconclusive, Petroleum Minister Murli Deora said after the meeting.

Other options

•Rationalisation of excise duty on passenger vehicles so that diesel-run luxury cars — which thrive on diesel subsidies meant for agriculture—are taxed heavier

•Reducing excise duty on petrol and diesel by Rs 1 per litre each while abolishing the ad valorem component of 6%

... contd.

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