The Hindu : National : ``Oil price hike under study''

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Friday, Apr 22, 2005

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National

``Oil price hike under study''

Special Correspondent

`UPA has placed less burden on people' Situation being monitored Price was band breached

NEW DELHI: The Government on Thursday said a hike in oil prices was under "active consideration" following the record rise in world crude oil prices.

Replying to questions in the Lok Sabha, the Petroleum Minister, Mani Shankar Aiyar, said a decision on raising petroleum product prices had not been taken "till now" but "the matter is under active consideration."

He said the United Progressive Alliance Government had placed less of a burden on consumers as far as oil prices were concerned than the previous NDA Government. Prices of petrol had been raised by 48 per cent under the NDA regime as against 13 per cent by the UPA Government while the figures for diesel were 112 per cent and 30 per cent respectively.

Excise duty

The Petroleum Ministry was holding discussions with the Finance Ministry on the issue of excise duty on petroleum products having been increased in the budget proposals. He assured the House that all such factors would be taken into account while taking a decision on oil prices.

Referring to suggestions that prices need not be raised and excise duty could be reduced, he said this would benefit consumers in the short run, but would result in a decline in revenue generation and foreign investments in the long term.

Investments were needed to make this sector vibrant.

The Government was continuously monitoring the price situation and there was an unprecedented, sharp and spiralling increase in international oil prices combined with volatility since the end of 2003.

The Indian basket of crude touched an all-time high of $52.83 a barrel on April 4 this year compared to an average price of $27.96 a barrel in 2003-4 and $39.21 a barrel in 2004-5.

"There has since been some softening, the Indian basket having declined to around $47 a barrel in the week ending April 16."

Public sector Oil Marketing Companies (OMCs) had not passed on the full increase in international prices to domestic consumer prices of these products. Although, with effect from August 1 last year, the Government had worked out a price band mechanism allowing OMCs freedom to revise the prices of petrol and diesel within the prescribed price band, the steep and volatile increase in the international prices of crude resulted in the ceiling of the price band being breached within weeks of its being made operational resulting in the mechanism being placed in abeyance.

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