The government is set to dump B K Chaturvedi panel's recommendation for a monthly increase in fuel prices till they are at par with costs, but may accept the high-powered committee's suggestions for imposing a tax on oil produced from fields awarded before 1999.
The oil ministry has forwarded a preliminary report to the Prime Minister's Office saying raising petrol prices by Rs 2.50 a litre per month till March 2009 and diesel by Rs 0.75 per litre till 2010 was not possible, official sources said.
Union Petroleum Minister Murli Deora has called a meeting with heads of oil companies on Tuesday to deliberate on the implications of the panel recommendations.
The oil ministry has also rejected the committee's call for pricing fuel at export parity rates, saying it would result in refineries losing around Rs 27,600 crore (Rs 276 billion) in revenues.
Also, suggestions for reducing import duty on petrol and diesel to zero were not accepted as it would reduce duty protection to the domestic refineries vis-a-vis international refiners.
However, the ministry was favourably inclined to the proposal for levying a special oil tax on oil produced from fields awarded prior to the advent of New Exploration Licensing Policy (NELP) in 1999.
It favoured stripping state-run firms like the Oil and Natural Gas Corporation of any gains above $75 a barrel, and taxing private companies like Cairn at 40 per cent over this benchmark rate.
This would help meet the revenue loss on sale of petrol, diesel, kerosene and liquefied petroleum gas, sources said.
Tuesday's meeting would also review reports of shortages on diesel in some parts of the country and the financial position of IOC, BPCL and HPCL.
