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Shri Mani Shankar Aiyar, Minister of Petroleum & Natural Gas informed the Rajya Sabha today that the year 2004-05 witnessed the highest rise in oil prices in international markets in recent times. As compared to the average Indian basket crude price of US$ 27.98/barrel during 2003-04, the average price during 2004-05 (April 2004-January 2005) has been US$ 37.87/barrel. Replying to the queries in Question Hour, he said during February and first fortnight of March it has been as high as US$42.67/barrel and US$48.98/barrel respectively. With a view to containing the burden of the increase in international prices on consumers of PDS kerosene, domestic LPG, diesel and petrol, it was decided that the burden should be equitably shared also by the Government and Oil Companies. Thus, Government reduced the excise duty on petrol, diesel and domestic LPG by 4%, 3% and 8% respectively effective 16/6/04. Further, effective 19.8.04, the excise duty on petrol, diesel and PDS Kerosene was reduced by 3%, 3% and 4% respectively. The Government also reduced customs duty by 5% each on petrol, diesel, PDS Kerosene and Domestic LPG with effect from 19.8.04.
In the Budget 2005-06, the following changes have, inter alia, been announced effective 1.3.2005.
Customs Duties
- Reduction in customs duty on crude from 10% to 5%
- Reduction in customs duty on domestic LPG and PDS Kerosene from 5% to nil
- Reduction in customs duty on other petroleum products from 15%-20% to 10%
Excise Duties
- Reduction in excise duty on Domestic LPG from 8% to nil and on PDS Kerosene from 12% to nil
As regards burden sharing by Oil Marketing Companies (OMCs), Shri Aiyar informed that they have not passed on the full increase in the international prices in the domestic consumer prices of these products. In addition to Government subsidy, public sector oil marketing companies (OMCs) have been sharing the burden by not passing the full increase in the international prices in the domestic consumer prices of PDS Kerosene and domestic LPG. Under-recoveries on this account are estimated around Rs.18,000 crore in the current fiscal year, 2004-05. There has been no increase in the price of PDS kerosene since April 2002; Diesel and LPG prices have been frozen since midnight of 4/5 November 2004, and of petrol since midnight of 14/15 November 2004. The prices of petrol and diesel in the country are fixed on the principle of import parity. The total under-recoveries to OMCs due to non-revision of prices of petrol and diesel for the period 1st April 2004 to 15th March 2005 are estimated at Rs.1526 crore.
The pricing mechanism for petrol, diesel, PDS Kerosene and Domestic LPG during 2004-05 has attempted to balance the interests of various stakeholders, viz. Consumers, Government and Oil Companies. The burden borne by oil companies will, of course, go up to the extent that domestic prices are not revised upwards when international prices shoot up, but it is hoped that when international prices stabilise the price band mechanism might be restored, thus moderating the burden of under-recoveries on oil companies.
RCJ /VK/retailprices(22.3.05)
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