The Prime Minister-appointed Kirit Parikh committee on Wednesday recommended complete decontrol of the petrol and diesel prices and favoured a hike of Rs. 100 a domestic LPG cylinder and an increase of Rs. 6 a litre for kerosene.
At the current global crude oil prices, deregulating auto fuel pricing would result in a hike of Rs. 4.72 a litre for petrol and a rise of Rs. 2.33 a litre for diesel.
Mr. Parikh, along with committee members, including Finance Secretary Ashok Chawla and Petroleum Secretary S. Sundareshan, presented a report to Petroleum and Natural Gas Minister Murli Deora.
“The current petroleum product pricing policy is not sustainable,” Mr. Parikh said after submitting the report.
At present, kerosene is sold at a discount of Rs. 18.06 a litre and domestic LPG cylinder at Rs. 287.59. The remainder of the gap between the retail price, after the suggested increase, and the imported cost of fuel, should be met by the government and by the upstream firms, ONGC and Oil India Limited.
Mr. Parikh said he did not see much inflationary pressure owing to the measures suggested. He asserted that steps such as an increase in the tax rates needed to bridge the fiscal gap between the retail price and the actual cost were unsustainable.
On his part, Mr. Deora gave enough hints that the government would not take any decision in haste. He said the report would be processed and presented to the government in a week’s time. Ministry officials said the government could accept the recommendation of freeing petrol prices but may decide against any such hike in the diesel rates, as a rise in transportation cost would further fuel food inflation. A hike in LPG cylinder price could also be in the offing but to a lesser extent than that was suggested.
In Delhi, petrol costs Rs. 44.63 a litre and diesel Rs. 32.87. A 14.2-kg LPG cylinder costs Rs. 281.20 and kerosene Rs. 9.09 a litre.
Without any increase, Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited are estimated to lose Rs. 46,030 crore in revenue this fiscal.
Mr. Parikh said the hike suggested for kerosene was in step with the rise in rural per capita income since the last increase was in 1999 (a hike of Rs. 2 a litre to Rs. 9.09). The rise recommended for domestic cooking gas rates was also in proportion to the rise in urban per capital income.
“It is a good time to free prices because petrol and diesel price increases will be very low. You would not wait for crude to touch $120 a barrel again,” he said.
The committee suggested that LPG and kerosene prices could be raised every year in step with the growth in per capital agricultural GDP at nominal rates and per capita income respectively. Freeing petrol and diesel prices would not only promote competition but also lead to more equitable sharing of inflation burden, affecting mostly people who can pay.