The finance ministry on Monday rejected a cut in duties to avoid an increase in petrol and diesel prices even as Petroleum Minister Mani Shankar Aiyar will begin a consensus building exercise within the United Progressive Alliance coalition for the fuel price hike.
Aiyar met Finance Minister P Chidambaram on Monday but failed to convince him that the Budget proposals for duty changes would give more revenue to the Centre and therefore, duty should be cut to avoid a price hike.
"I am more than convinced about the finance minister's statement that the Budget proposals are revenue neutral," he told reporters after a 50-minute meeting with Chidambaram.
Aiyar said he would meet left leaders, including Sitaram Yechury and other members of the UPA coalition, on the issue of raising petrol and diesel prices.
The Budget for 2005-06 had proposed lowering customs duty on crude oil, LPG, kerosene, petrol and diesel, but raised the excise duty on petrol and diesel even as the same on LPG and kerosene was lowered.
Increase in excise duty has necessitated an increase of Rs 2.52 per litre in petrol prices and Rs 1.65 a litre in diesel.
Excise duty changes plus the spike in cost of crude oil and hike in cess for road development necessitate a Rs 4.59 per litre increase in petrol and Rs 5.18 a litre in diesel prices.
Public sector oil firms have neither passed on the spurt in crude prices nor the duty changes, resulting in over Rs 950 crore (Rs 9.50 billion) loss in revenue during the first fortnight of April.
Though duty changes were projected to be revenue neutral by the finance ministry, the hike in excise duty on petrol and diesel were estimated to net an additional Rs 3,000 crore (Rs 30 billion) for the Centre.
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