States told to rationalise sales tax on petrol, diesel

Special Correspondent

NEW DELHI: Petroleum and Natural Gas Minister Murli Deora on Tuesday told the Rajya Sabha that his Ministry had written to all Chief Ministers and the Finance Minister of West Bengal, in his capacity as the chairman of the Empowered Committee of State Finance Ministers, asking them to rationalise the sales tax on petrol and diesel to cushion the impact of rising international oil prices on consumers.

Responding to the calling attention motion moved by Tapan Kumar Sen of the CPI(M) and Rajiv Pratap Rudy of the BJP, Mr. Deora said State governments were imposing a high rate of tax at the local level, and this needed to be looked into urgently.

Notwithstanding the Rs. 4 a litre increase in the price of petrol and Rs. 2 a litre in the price of diesel, the public sector oil marketing companies would lose Rs. 2,880 crore in July, as the retail prices were lower than the original cost, he said. The July 2 increase had helped IOC, BPCL and HPCL cut their losses for July from Rs. 4,870 crore to Rs. 2,880 crore.

Explaining the rationale behind the price increase, Mr. Deora said the price of the basket of crude oil imports jumped by 70 per cent to $69.12 a barrel in June from $40.61 in December. Though the international oil prices dipped a bit in the first fortnight of July, they started rising in the second fortnight, and the price of the basket during July averaged out at $63.22.

He said the government did not increase the retail prices of kerosene and domestic LPG so as to provide relief to the poor and the middle class; it was bearing a subsidy burden of Rs. 15.26 a litre on kerosene supplied through the Public Distribution System and Rs. 92.96 on the 14.2-kg domestic LPG cylinder.

Replying to clarifications, Minister of State for Petroleum and Natural Gas Jitin Prasada said that moving from the present system of import parity pricing of fuel to the cost-plus system would lead to an increase of Rs. 1.74 a litre in the price of petrol and Rs. 0.43 per litre of diesel. The government had reduced the customs duty on petrol and diesel from 15 per cent to 2.5 per cent since 2004, and it accounted for a mere 0.84 per cent of the retail selling price.

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