Govt Puts Off Diesel, LPG Rate Hike Amidst Protests

New Delhi
Govt Puts Off Diesel, LPG Rate Hike Amidst Protests
Amidst street protests and dissent from within over the unpopular steep hike in petrol price, the government today seemed to have put-off an increase in diesel and cooking gas LPG rates for now even as oil firms hinted at a marginal reduction in petrol prices this week.

Finance Minister Pranab Mukherjee held consultations with Oil Minister S Jaipal Reddy and Chief Economic Adviser Kaushik Basu on the impact of an increase in prices of ultra-sensitive products like diesel on inflation but deferred a meeting of ministerial panel he heads on the issue.

An Empowered Group of Ministers (EGoM) on fuel prices was being proposed to meet on May 31 and availability of concerned ministers was being checked when the meeting was put off.

"We are not considering hike in prices of diesel, domestic LPG and kerosene. It is out of question right now," Reddy told reporters after meeting Mukherjee.

Stating that no dates have yet been fixed for convening a meeting of EGoM, he said, "I am not going to touch the prices of LPG, diesel, kerosene. Period".

As if dousing the fire ignited by the Rs 7.54 a litre hike in petrol price, oil firms said a reduction of Rs 1.25-1.50 a litre may be possible on June 1 if global oil rates continue to decline and rupee appreciates against US dollar.

Mukherjee, however, parried a question on rollback in petrol prices saying, "Petroleum Minister has already explained in detail the position in respect of increase in petroleum prices. I have nothing to add".

He may instead write to the state governments to cut VAT or sales tax on the fuel to ease common man's burden.

States have landed with an windfall from the fuel rate hike as the 20-33 per cent VAT they levy on petrol got them more after the base price increase of Rs 6.28 per litre.

Taking cue, Delhi, which got an additional Rs 1.25 a litre on top of what it was already getting from 20 per cent VAT, decided to forego the additional benefit. Rates of petrol in Delhi will be cut to Rs 71.92 a litre from Rs 73.18 per litre effected from May 24.

R S Butola, Chairman of nation's largest oil company Indian Oil Corp, said oil companies "will certainly pass on" any benefit of decline in global oil price to consumers.

"We are awaiting inputs from the Petroleum Ministry. Finance Minister will be asking the state Chief Ministers to lower duties," a finance ministry official said.

Besides Delhi, Congress-ruled Uttarakhand and Kerala have already announced cut in VAT on petrol.

State governments get anything between Rs 12.20 -19.83 per litre on petrol by way of VAT. Central government also levies a fixed duty of Rs 14.78 per litre, taking the total tax component in the price of petrol to over 40 per cent.

The EGoM on fuel prices hasn't met since June last year even though depreciation in the rupee and rise in international oil prices have raised the cost of imports.

"It was only a meeting of the inter-ministerial group to look at the question of inflation. I was requested to come and offer my insights before they finalise their group recommendations," Reddy said.

"I focused on the price of diesel and its impact on inflation as a whole," he said without elaborating. "No date has been fixed for EGoM on diesel price deregulation."

The government is believed to be buying time to let flared tempers cool before calling the meeting of the EGoM where the Congress party's ruling allies TMC and DMK are also represented. Both TMC and DMK have held street protests against the hike in petrol price.
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