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Petrol price not to fluctuate on daily basis: Sinha

Finance Minister Yashwant Sinha said that petroleum companies will absorb the daily fluctuations in the international oil prices and revise the retail rates only at regular intervals once the administered pricing mechanism is dismantled on April 1.

Prices of petrol and diesel will not fluctuate on a daily or even weekly basis once these commodities are brought under free market, Sinha told UNI in an interview.

Petroleum companies will have to evolve a system to effect price changes on a monthly or a quarterly basis on the lines of the practice in other countries where petrol sales are governed by free market forces, the finance minister said.

The finance minister also answered questions relating to the revenue collection and divestment targets and issues involving interest rates and the role of the proposed regulator in the petroleum sector.

Domestic prices of petrol and diesel would be linked to the international crude prices. The regulator, to be appointed by the government, would monitor the prices set by the petroleum companies to ensure that there was no price manipulation and they followed set norms.

''The regulator will look at the fixation of market prices, not in terms of controlling them, but how they are being done. Clear principles are being laid down. Quite clearly, prices will go up or down in accordance with the international rates,'' Sinha said.

The regulator would also intervene if there was a dispute between the consumer and the supplier and in case of price manipulation.

The petroleum regulatory body would have functions similar to the regulators in other sectors.

Sinha said he was confident of achieving the revenue and divestment targets set for 2002-03, despite the Rs 250 billion slippage during the current year.

The high fiscal deficit of 5.7 per cent of GDP this year was mainly on account of low realisation of taxes and shortfall in meeting the Rs 120-billion divestment target.

''In fact, the estimates are very conservative.'' The estimated revenue growth was based on the trend growth of ten to eleven per cent, which had been achieved even in the worst of years.

In addition to this, he pointed out he had gone for additional resource mobilisation this year to the tune of Rs 60 billion by enlarging the service tax net and through the five per cent surcharge on personal income tax.

The revenue shortfall in the current year was mainly due to the giveaways amounting to Rs 160 billion announced in the Budget and a lower realisation of Rs 50 billion from divestment.

''Otherwise, my shortfall would have been just Rs 40 billion even in the face of a grave industrial slowdown,'' the finance minister said.

The industry was expected to pick up in the next fiscal in view of the good agricultural growth this year.

''Better growth of industry would result in better tax realisation.''

He regretted that he had the sad experience of seeing the massive giveaways last year not resulting in either higher revenue realisation or industrial growth.

Even the divestment target of Rs 120 billion was very conservative, given the fact that the privatisation process was now on a smooth path.

''There is, in fact, a possibility of exceeding the divestments target,'' Sinha said.

The finance minister indicated that he was strongly in favour of adopting the Fiscal Responsibility and Budget Management Bill without diluting its provisions, aimed at checking fiscal and revenue deficits.

Fiscal consolidation would be impossible in the absence of a stipulation in law, he averred.

The government was now considering the recommendations of the standing committee, which had suggested removal of the clauses relating to annual fiscal and revenue deficit targets.

It had argued that these would come in the way of effectively tackling situations like natural calamities which often entailed huge expenditure.

Replying to a question why the government persisted with reducing the interest rate when it had so far failed to kick-start the economy, Sinha clarified that the attempt was to link the interest on small savings to inflation and market rates.

''For god's sake, it has nothing to do with kick starting the economy.''

Sinha, however, admitted that it would take time for the people to appreciate the logic of linking interest rate to inflation.

UNI

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