Petroleum Ministry for cap on subsided cylinders per household

In a move that is likely to financially burden consumers, the Petroleum and Natural Gas Ministry has moved the Cabinet for a hike in prices of diesel, LPG cylinders and kerosene. The Ministry will also discuss the issue of putting a cap on number of subsidised cylinders that a household can avail of up to a certain income limit.

In addition to this, the elected members including Ministers, MPs, MLAs, MLCs and Councillors are also likely to face discontinuation of subsidised LPG cylinders. The Ministry is also likely to impress upon the Cabinet to take a call on imposition of a higher duty on diesel vehicles in view of the massive jump in consumption of diesel in the recent past. During July, diesel sales jumped by 12 per cent sending alarm bells ringing.

The increase in sales of SUVs over the last few months and especially diesel cars has further burdened the exchequer as the oil marketing companies (OMCs) are losing around Rs. 19 per litre on subsidised sale of diesel and Rs. 6 per litre on petrol. The subsidy on LPG cylinder stands at around Rs. 347 per cylinder and on kerosene at Rs. 34.34 per litre.

As per the proposal every household will get only four to six LPG cylinders at subsidised price of Rs. 399 in Delhi, and they will have to pay market price of Rs. 746 per cylinder for any requirement beyond that. Besides considering raising diesel, domestic LPG and PDS kerosene rates, the CCPA may also consider a cut in the Rs. 14.78 per litre excise duty currently levied on petrol.

A top official of the Petroleum Ministry said a proposal has been moved for the hike through a Cabinet note for the Cabinet Committee on Political Affairs (CCPA). Petrol is not part of the price hike proposal as it is a decontrolled commodity and the OMCs are free to revise its prices according to trends in the international crude oil markets. "We have been pressing for a petrol hike but that is likely to happen along with the hike in other petroleum products after Cabinet approves of it. It will be a simultaneous hike for all petroleum products," another senior official said. The CCPA is likely to meet and consider the hike next week.

The Petroleum Ministry has stated in the note that supply of subsidised LPG cylinders should be limited to four to six per household in a year. It has also proposed barring households with income of more than Rs. 50,000 per month or Rs. 6 lakh in a year from getting subsidised LPG cylinders.

"The situation is very grim as the OMCs faced the possibility of down grading by international rating agencies. This will seriously hurt their attempts to raise funds, an area in which they are already stretched," the official added.

Diesel, domestic LPG and PDS kerosene rates have not been changed since June 2011 even though cost of production has soared 28 per cent. Oil PSUs are losing Rs. 560 crore per day on sale of diesel and cooking fuel at present, and are forced to resort to short-term borrowings to meet funds needed for importing crude oil. Borrowings of the three state fuel retailers, who in the first quarter reported biggest net losses in Indian corporate history, shot up to Rs. 157,617 crore at end of June from Rs. 128,272 crore as on March 31.

"In private conversations, political parties agree on the necessity to hike fuel prices but when such a decision is taken, they criticise it which is nothing but dishonest politics," the official remarked.

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