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Officials see no change in fuel rates

August 13, 2008 02:24 IST

Oil ministry officials say it is unlikely that the government will accept the BK Chaturvedi Committee's recommendation for raising the retail prices of petrol and diesel as it faces general elections in less than a year.

The move also risks putting pressure on inflation, which has already crossed a 13-year high.

However, the recommendation on how much the oil refiners will get for their products will be the only one that is likely to be adopted, they say.

The committee has said that the refiners should be paid what exporters get for a similar product (export parity price), instead of the current payment of what importers shell out.

However, various industry officials are sceptical and say an action on the report is unlikely. "Under current conditions, freeing prices of petrol, diesel and LPG is not likely to happen," said a senior official in the petroleum ministry.

The committee has recommended that petrol prices be increased by Rs 2.50 every month to align them with international prices by March 2009, and that diesel prices be raised by 70 paise per month so that they can be market-determined by March 2010.

The committee has also suggested that a maximum of six subsidised LPG cylinders be given per household this year, which should be gradually phased out by March 2011.

Government officials say the recommendations will be difficult to implement at a time the inflation rate is at a 13-year high and the government will face elections next year. When fuel prices were increased by around 10 per cent on June 4, inflation rose by over a full percentage point as a result.

Petroleum Minister Murli Deora declined to comment on the report.

The oil marketing companies -- Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation -- are also sceptical about the implementation of the recommendations.

Two officials of public sector oil companies said the recommendations of the committee were in line with the marketing companies' expectations. "These are just recommendations. It remains to be seen how much of it will be implemented," said a top official with an oil marketing company.

The recommendations of the committee are also almost the same as those made by the C Rangarajan Committee on pricing and taxation of petroleum products which submitted its report in February 2006. Both committees recommended freeing prices of petroleum products and the government moving away from controlling prices of petrol, diesel and LPG.

"Every one knows what needs to be done. If only the Rangarajan Committee recommendations are implemented, we will not need any other committee," IOC Chairman and Managing Director Sarthak Behuria said in an interview recently.

Petroleum ministry officials say the recommendations of the two reports are bound to be similar as the fundamentals of the industry have not changed since the Rangarajan panel submitted its report.

"This shows that another committee was not really needed," one official added.

Rakteem Katakey in New Delhi
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