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Oil prices set to increase

Special Correspondent

NEW DELHI: The prices of oil products are set to rise with Prime Minister Manmohan Singh having concluded consultations with the Left parties on this contentious issue on Thursday. He is expected to convene a meeting of the Cabinet Committee on Economic Affairs in the next few days to formally clear the proposal.

Indications are that kerosene prices will not be raised, while petrol and diesel prices will be raised by Rs. 1 to Rs. 2 a litre. LPG prices may also be revised, despite the Left parties strong opposition to the proposal.

The price hike is meant to offset the spiralling cost of crude imports as world prices have reached unprecedented heights and are currently ruling at about $54 a barrel. It will also neutralise the impact of budgetary taxes on the oil sector, including changes in excise duty as well as levy of an additional cess for road development. As a result of these factors, the national oil companies have had to face losses on sale of oil products running into thousands of crores of rupees.

Detailed discussions

These issues were discussed during Dr. Singh's 45-minute meeting with Communist Party of India general secretary A. B. Bardhan, his party colleague D. Raja and Forward Bloc general secretary Debabrata Biswas here. Mr. Bardhan said the price hike now appeared inevitable but felt it would be minimal as a result of the pressure of the Left parties. Mr. Bardhan presented the same set of suggestions that had been made by the CPI(M) representatives, Prakash Karat and Sitaram Yechury, at Friday's meeting.

During the meeting, however, Dr. Singh apparently pointed out that it was only the `navaratna' oil companies that had the financial muscle to make investments in oil equity abroad, which would, in turn, reduce the country's growing dependence on imports. He did not expect any downturn in global oil prices in the near term, which meant the country was headed for a huge possibly unsustainable import bill in the coming years. In this context, he highlighted the need to invest in the future rather than for the next three months. The oil companies, critical to future energy strategy, could not be allowed to run into losses. At the same time, he is believed to have assured them that the inevitable increase will be made as little as possible to soften the blow for consumers.

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