The Cabinet on Thursday decided that the retail prices of domestic liquefied petroleum gas and kerosene sold through the public distribution system would not be increased and the Oil and Natural Gas Corporation would share a part of the subsidy burden on these two cooking fuels.

The Cabinet has also decided that the subsidy on these two petroleum products will be phased out in "3-5 years after the dismantling of the administered pricing mechanism on April 1, 2002," and not "after three years" as suggested by Finance Minister Jaswant Singh in the Budget for 2003-04.

Helping hand

The retail prices of domestic LPG and kerosene sold through the public distribution system will not be increased The subsidy on these two petroleum products will be phased out in three to five years after the dismantling of APM on April 1, 2002 The two alternatives being considered are to regulate the prices being paid to ONGC for the crude it sells to refining companies, or to regulate the prices of gas sold by it

At present, the entire subsidy burden on these two cooking fuels is shared by Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd, which have been selling domestic LPG at Rs 90 a cylinder and PDS kerosene at Rs 2.35 a litre below their costs.

These companies have incurred Rs 3,200 crore (Rs 32 billion) losses so far in this financial year. The Cabinet has decided that these companies will evolve a system to pass on a part of this burden to ONGC.

The petroleum ministry will ratify the system to ensure that there is no increase in the prices of these two fuels.

The two alternatives being considered are either to regulate the prices being paid to ONGC for the crude it sells to refining companies, or to regulate the prices of gas sold by it.