Cut excise duty on LPG, kerosene and diesel

Vol 6, PW 16 (09 Oct 02) Midstream & Downstream

CUT EXCISE DUTY on LPG, kerosene and diesel to make them more affordable - or face the consequences! That's the stark message oil ministry officials are telling their counterparts in the finance ministry.

We hear Shastri Bhawan is panicking at the impact high crude prices will have on the subsidised price of kerosene, LPG and diesel. In a letter to the finance ministry last month Shastri Bhawan said it believes crude will stay at $27 per barrel for the next three months.

Worse, it said the international price of LPG between 1st and 12th September was $257 per tonne and that of kerosene $241 against $194 per tonne for LPG and $166 for kerosene in March, when the price in India was last revised. "If this increase is passed on to consumers, it will lead to an exorbitant rise in retail selling prices," reads the note.

"At current excise duty rates, the price of kerosene and cooking gas in Delhi will go up from Rs8.98 per litre to Rs11.83 per litre and from Rs240.45 per cylinder to Rs306.05 per cylinder." Argues the ministry: cut excise duties so the blow to the consumer is softened. Oil minister Ram Naik is under pressure from Indian refiners to hike prices but is unwilling to accept the political consequences: in India kerosene is the "poor man's cooking fuel"; LPG is used as cooking fuel by the middle classes.

Excise on kerosene, LPG and diesel is 16%. The oil ministry suggests two options: cut excise on LPG and kerosene to 8% and on diesel to 12%; or cut excise on LPG and kerosene to 4% and on diesel to 13%.

Which option will it choose Read on.