Date:01/06/2008 URL: http://www.thehindu.com/2008/06/01/stories/2008060160161000.htm

National

Congress core group debates fuel prices

Sujay Mehdudia

The matter will now be placed before the CCPA
Sharp differences between Petroleum, Finance Ministries

NEW DELHI: The core group of the Congress, comprising Prime Minister Manmohan Singh and Congress president Sonia Gandhi, met on Friday in the backdrop of “sharp differences” between the Petroleum Ministry and the Finance Ministry over the “proposed quantum of hike” in petrol, diesel and LPG prices.

The core group is learnt to have endorsed the decision to hike fuel prices keeping in mind the international oil scenario.

Deora present

Interestingly, for the first time, Petroleum and Natural Gas Minister Murli Deora was invited to the meeting. The matter will now be placed before the Cabinet Committee on Political Affairs (CCPA) next week for approval.

Unhappy with the handling of the “oil crisis,” the oil marketing companies (OMCs) had warned that the situation would not be resolved under the “mixed package formula” being proposed and it would only lead to “massive shortages and queues” at the retail outlets, especially that for diesel.

Informed sources said the Finance Ministry was urging the Petroleum Ministry to increase the price of petrol by Rs.10 a litre and spare diesel from any hike to avoid inflationary pressure. The OMCs and the Petroleum Ministry, however, are opposed to such a move.

The Petroleum Ministry wants the petrol price to be raised in the range of Rs. 3 to 6 per litre and that of diesel around Rs. 2 to 3 a litre. It also wants the price of domestic LPG raised by at least Rs. 50 a cylinder, arguing that any attempt to avoid a hike in diesel price would only lead to black-marketing and misuse of this highly subsidised product.

“The consumption of diesel has been averaged at around 10 per cent per annum for the last many year with an upside margin of four to five per cent. However, the consumption has suddenly shot up to an unprecedented increase of 28 per cent and it was not possible to continue imports or distribution of this product at the current price levels,” a senior OMC official stated.

He said that any move to exclude diesel from price hike would only further complicate things as high import cost and massive losses faced by the OMCs on diesel would force them to cut imports leading to curtailment of supplies at retail outlets.