NEW DELHI: With the Finance Minister, P. Chidambaram, maintaining a firm "no" to scaling down the duties on petroleum products, the Petroleum Ministry is seeking an increase of Rs. 2.50 a litre in the price of petrol and Rs. 1.30 a litre on diesel price.

Following North Block's rejection of the duty cut proposal put forward by the Minister for Petroleum and Natural Gas, Mani Shanker Aiyar, the Ministry is now of the view that the increase of Rs. 2.20 a litre in petrol price and Rs. 1.06 a litre on that of diesel owing to the hike in duties, coupled with the additional cost of producing cleaner fuel — Rs. 0.30 a litre on petrol and Rs. 0.24 a litre on diesel — should be passed on to the consumers.

Ministry officials note that Mr. Chidambaram, at a meeting here on Monday, rejected the Petroleum Minister's proposal of parting with the additional revenues to be garnered from the hike in excise duty on petrol and diesel.

On the contrary, the Finance Ministry maintained that it would lose Rs. 5,460 crores on reduction in customs duty on crude oil, along with another Rs. 390 crores on the reduction in import duty on liquefied petroleum gas (LPG) and kerosene, apart from yet another Rs. 2,140 crores on slashing of the excise duty on the two cooking fuels. Besides, it stood to lose Rs. 1,100 crores on CVD/AV (assessable value).

Against this, it would gain just Rs. 8,961 crores from the increase in excise duty on petrol and diesel, thereby rendering the entire exercise revenue-neutral.

"The Finance Ministry assumptions of revenues are at a crude price of $38 a barrel while the April average has been $49.27 a barrel. They will gain more than they will lose," an official said. This apart, the increase in road cess would fetch another tidy sum of Rs. 3,116 crores in 2005-06.

The increased duties and spiralling crude prices actually warrant a Rs. 5.26 a litre increase in price of diesel and Rs. 5.77 a litre hike in the price of petrol.

In their absence, the oil PSUs stand to lose about Rs. 2,400 crores a month.

Coupled with this, the oil companies also stand to lose Rs. 14,000 crores in the full year of 2005-06 on sale of LPG and kerosene as the present prices are nowhere near the costs.

"I am more than convinced that the Budget proposals are indeed revenue-neutral," Mr. Aiyar told newspersons after his meeting with the Finance Minister. He said it has to be examined if the increased cess is to be passed on to customers, as it will accrue only when it is collected.

"I will meet Left party leaders and other allies on the issue," Mr. Aiyar said. The consensus of the discussions would be placed before the Cabinet for approval.

Officials said the increased duties on petrol and diesel were balanced by lowering of rates on domestic cooking gas (LPG) by Rs. 17.75 a cylinder and on PDS kerosene by Rs. 0.88 a litre.

Despite this, the oil firms were selling kerosene at Rs. 10.30 a litre discount to cost and domestic LPG was under-priced by Rs. 82 a cylinder.

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