Pranab asks CMs to cut state levies on diesel, LPG

Finance Minister Pranab Mukherjee asked all chief ministers to reduce state levies on diesel, kerosene and cooking gas to mitigate the impact of the price hike on the common man.

Seeking their co-operation, the finance minister in a letter "urged state governments to reduce levies on diesel, kerosene and domestic LPG line with the duty cuts undertaken by the Centre so as to provide some relief to the common man."

An Empowered Group of Ministers (GoM), headed by Mukherjee, on last Friday raised the price of diesel by Rs 3 per litre, cooking gas by Rs 50 per cylinder and kerosene by Rs 2 per litre. It also slashed customs and excise duties on petroleum products. Mukherjee in his letter explained the rationale of price hike, saying rising global crude oil prices necessitated the move to increase rates.

The finance minister has said that the government has so far maintained a firm control over the prices of diesel, kerosene and domestic LPG despite global prices rising for the past six months, resulting in daily loss of Rs 450 crore (Rs 4.5 billion) to oil marketing companies.

This has necessitated some revision in the administered prices, he said. He further added that the government has been conscious of the burden on the common man, and therefore, the price hike has been kept minimal.

Even though the government has been under compulsion to maintain its fiscal and budgetary resource management targets and find additional resources to finance various welfare schemes, it has sacrificed its revenues from the oil sector on account of customs and excise duty in order to minimise the impact on the common man, the letter emphasised.

The central government decision remove customs duty on crude oil, reduction in customs duty on petroleum products and excise duty cut on diesel together would result in a revenue loss of Rs 49,000 crore (Rs 490 billion) per annum.

In order to partly neutralise the impact of the price hike, West Bengal Chief Minister Mamata Banerjee has announced withdrawal of sales tax on cooking gas.

The decision would reduce the price of a cylinder of LPG by Rs 16. In view of the widespread protests against the price hike, the Congress has also asked its Chief Ministers to look at the possibility of providing similar relief to the common man.

The price of crude oil in the international market, according to Petroleum Ministry, has gone up from $75 per barrel in June, 2010, when the prices of diesel, kerosene and LPG were raised last, to $110 per barrel. India imports about 84 per cent of its total crude oil requirement.