New Delhi: Finance Minister P. Chidambaram on Tuesday said a consensus was being evolved to tackle the problem of subsidies. Consultations were held with stakeholders to evolve a consensus on food, fertilizer and petroleum subsidies.

Speaking at a press conference here, he said the next step would be to go to the Prime Minister and the Cabinet and then have consultations with both the allies and the Opposition. The aim was to ensure that subsidies were aimed at the poor and the needy as had been promised in the National Common Minimum Programme.

On high global oil prices, Mr. Chidambaram said the issue was not addressed, in the Union budget he presented earlier in the day, "because we have no control over this situation." Instead, the burden of rising oil prices was shared among all stakeholders including consumers, companies and the Government. Working groups including the Rangarajan Committee were set up to consider the issues on taxation and pricing of oil products.

Though kerosene and LPG subsidy issues remain unresolved in the budget, the Minister has partly implemented the Rangarajan Committee proposals. He has raised the cess on crude from Rs. 1,800 to Rs. 2500 a tonne. It will be levied on the oil producing companies, Oil and Natural Gas Corporation and Oil India. The Minister gave the assurance that the levy would have no impact on retail prices of petroleum products. The increase in cess is expected to net about Rs. 2,000 crore for the exchequer.

The Rangarajan Committee proposed that instead of seeking transfer of funds from upstream to downstream oil marketing companies (OMCs) every year, the cess on crude be raised to Rs. 4,800 a tonne and utilised for providing financial support to the OMCs.

In a bid to reduce the prices of liquefied petroleum gas, Mr. Chidambaram has proposed including domestic LPG in the list of "declared goods" under the Central Sales Tax Act, ensuring that the rate is kept at four per cent instead of the much higher levies now being imposed by the States. He said: "The States are taxing domestic LPG at high rates. They should also bear a portion of the burden of high prices of petroleum products."

Naphtha duty reduction

The budget proposals also envisage a cut in customs duty on naphtha and petroleum coke from 10 to five per cent while customs duty on natural gas including propane and butane has been fixed at five per cent. In addition, the concessional rate of 10 per cent for projects has been extended to pipeline projects for transport of crude, petroleum products and natural gas. The subsidy for petroleum products has been fixed at Rs. 3,080 crore for 2006-07 as against Rs. 3,644 crore in the revised estimates for 2005-06. Of this, kerosene and LPG alone account for Rs. 2,900 crore, about the same level as in the current fiscal.

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