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June 3, 2002 | 1625 IST
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Govt hikes petrol, diesel prices

Tara Shankar Sahay in New Delhi

Prices of petrol and diesel were hiked on Monday by about 9 per cent at Rs 2.50 and Rs 1.50 per litre, respectively, following the surge in international crude prices.

Accordingly, from midnight of June 3-4 petrol would cost Rs 28.94 per litre in New Delhi as against Rs 26.54 now, while diesel would go up from Rs 16.59 to Rs 17.99.

Apart from increasing the hike in prices of petrol and diesel, the government also decided to cut excise duty by 2 per cent for both petrol and diesel to partly neutralise the impact of over $5-a-barrel increase in crude prices witnessed in last three months. This is the first price hike in 2002 after cut in prices of petrol and diesel announced in January and February, Petroleum Minister Ram Naik told reporters.

Announcing the two-pronged strategy of price hike and excise duty cut to combat effects of hardened global oil market, Petroleum Minister Ram Naik told reporters that oil companies would be compensated Rs 20 billion, which they lost on account of selling these products below the cost.

Consumers in Mumbai would be the hardest hit among the four metros due to very high sales tax rates and would now have to pay Rs 33.47 for a litre of petrol, which is Rs 2.69 more than the present price, while diesel would cost them Rs 22.85 against Rs 21.10 per litre now.

Kolkata would have a price tag of Rs 29.39 (Rs 26.99) for petrol and Rs 18.38 (Rs 16.97) for diesel, while Chennai customers would have to pay Rs 31.05 (Rs 28.49) and Rs 19.63 (Rs 18.10) for the two fuels, respectively.

Besides agreeing to compensate oil companies, government also lowered excise duty on petrol from 32 per cent to 30 per cent and on diesel from 16 to 14 per cent.

He pointed out that these prices will apply in states having sales tax at 25 per cent on petrol and at 20 per cent on diesel.

He said that in areas where sales tax rates are different, the increase would be lower or higher depending on the tax rates.

Naik said from now onwards there would be 'automatic adjustment' as the oil companies have agreed to revise prices every 15 days and thanked the public sector oil companies oil for not hiking the selling prices till now despite the burden on their finances, which the government would compensate now.

"They can either be given bonds or cash. The finance ministry will decide on it in consultation with petroleum ministry," he said.

Naik had two rounds of discussion with the prime minister after detailed deliberations with Finance Minister Yashwant Sinha on Saturday to work out details of excise adjustment, which would be revenue neutral, and subsequently held talks with oil companies today on the quantum of price increase.

"Oil companies would make further adjustments, upward or downward, on fortnightly basis with the changes in the refinery gate prices which are fixed in line with international oil prices," he said.

At the same time, government would review the price situation every quarter to make adjustment in excise duty, Naik said, adding that "in case government is garnering more revenue it will share some of it, if it is losing revenue then it can get more."

On a query if the government was also contemplating changes in cooking gas and kerosene prices, Naik said, "No."

He pointed out that crude prices had surged from $19.58 average in March to $25.05 a barrel in May.

Official sources pointed out that government had envisaged a tax revenue of Rs 440 billion from the petroleum sector during 2002-03 with global crude prices of $20 a barrel anticipating 3 per cent increase in consumption.

However, at the current level of crude prices, revenue from this sector could go up by about Rs 40 billion during the year and hence the downward revision, they said.

Asked whether he would initiate action against petrol pumps in New Delhi from where both petrol and diesel had disappeared with the consumers put to great inconvenience, Naik said: "Send me the names and I will take strict action."

The Rediff Budget Special

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