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Petrol, diesel prices may go up if finance ministry has its way

Pradeep Puri

The finance ministry is considering a proposal to pass on the excise duty impact on petrol and diesel to consumers in the form of higher prices. The proposal is aimed at reducing the deficit in the oil pool account by the end of the current fiscal.

In case the finance ministry pushes through this proposal, it would lead to a "substantial" increase in the retail prices of petrol and diesel with its resultant economic and political fallout.

At present, the excise duty is absorbed by the oil pool account. Petrol attracts a 32 per cent excise duty, while it is 16 per cent on high speed diesel. The ministry is of the view that this is the only way to cut the oil pool deficit, which is hovering around Rs 35 billion, without affecting the revenue collections adversely.

However, the petroleum ministry is opposed to the proposal and wants the finance ministry to bring down the excise duties on petrol and diesel to their pre-Budget levels of 16 per cent and 12 per cent, respectively.

Petroleum minister Ram Naik has even written to finance minister Yashwant Sinha suggesting that the oil pool deficit could be controlled by bringing down the customs duties on crude oil and major petroleum products to 5 per cent and 15 per cent, respectively, as approved by the Cabinet on November 1997 for the year 2001-02 while laying down the schedule for dismantling the administered price mechanism in the oil sector.

Naik has also asked the finance ministry to allow the Oil Coordination Committee to withdraw from the public account its deposit of Rs 44.29 billion.

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