Petrol and diesel prices slashed:
In order to usher a feel-good factor dovetailed with the fiscal impetus package to be announced on Saturday, the UPA Government has decided to cut the price of petrol by Rs 5 per litre and diesel by Rs 2 per litre from Saturday, leaving cooking gas LPG unchanged."The cuts were decided in principle today after consulting Prime Minister Manmohan Singh and Congress chairperson Sonia Gandhi. It has the approval of former Finance Minister P Chidambaram whom Petroleum Minister Murli Deora met Wednesday night," said our sources.
The respite would put extra money into people's pockets so that the net income effect could spur demand in a slowing economy. It would also reduce the inflationary pressure on the wholesale price index where Fuel, Power, Light & Lubricants Group has a weight of 14.23 percent. Since September, crude Oil prices have started sliding and are now at 2005 levels of $44 but the government could not revise prices downwards as the Model Code of Conduct for elections bars it from making any announcement that could be seen as appeasing voters. State-run oil marketing companies started earning extra returns from November with current month profit on petrol at Rs 14.89 a litre and on diesel at Rs 3.03 per litre. However, the three OMCs continue to lose Rs 17.26 per litre on kerosene and Rs 148.32 on a cylinder of LPG.
In June, the government raised the price of petrol by Rs 5 per litre, diesel by Rs 3 per litre and domestic LPG by Rs 50 per cylinder due to the high international prices of crude oil which touched a peak of $147 a barrel mid-July.
Friday, December 5, 2008
STATES MAY CUT SALES TAX
The long debated issue of a hike in fuel prices has come to an end. The government has finally announced the inevitable hike on Wednesday. Petrol prices have been hiked by 5 Rs while diesel will be dearer by 3 Rs. LPG will also cost Rs 50 more per cylinder. However, the Cabinet Committee on Political Affairs, which approved the price hike, has not announced a hike in kerosene prices.
Congress party president Sonia Gandhi has asked chief ministers in party-ruled states to also cut sales tax on petroleum products. The Maharashtra government, led by the Congress party, has already indicated a likely cut.
Nearly half of retail auto fuel prices in India comprise of duties and taxes, with sales tax, which varies in different states, ranging from 10 percent to 30 percent.
Prices eased earlier, weighed by India and Malaysia's move on Wednesday to raise retail fuel prices. They joined a growing number of Asian nations no longer able to afford big subsidies in the face of record oil prices.
India raised retail petrol and diesel fuel prices by about 10 percent and Malaysia hiked petrol prices by 41 percent. Taiwan, Sri Lanka and Indonesia reviewed their subsidies last month.
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Government raises fuel rates were based on international crude price of $135 per barrel. The previous steep hike was in September 2006.
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Government cuts 5% customs duty on crude, bringing the rate to 0% customs duties on petrol and diesel to 2.5% and ATF and naphtha for non-fertiliser use to 5 per cent.
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Excise on petrol cut by Re 1 a litre to Rs 13.45, and on diesel to Rs 3.60.
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Indian Oil, Bharat Petroleum and Hindustan Petroleum would have suffered a loss of Rs 2,45,305 crore. Hike will give them Rs 21,153 crore, government will forego Rs 22,660 crore.
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Inflation may go beyond 10% because of the impact of the hike.
We are helpless. There was no other option as the losses of the oil companies were huge, ‘he petroleum minister, Mr Murli Deora, said at a press conference while announcing the hikes. The price of kerosene, the so-called poor man’s fuel, was untouched. The Cabinet Committee on Political Affairs, which met in the morning, gave its approval. After the hike, petrol in New Delhi will cost Rs 50.56 per litre, diesel Rs 34.80 per litre and LPG Rs 344.75. The public sector oil companies will save about Rs 21,000 crores. All Opposition parties criticise hike. Left demands review, calls for agitation.
West Bengal, ruled by the central government’s communist allies, has cut sales tax on auto fuels by about 5 percent, in an effort to reduce the impact of Wednesday's fuel price increase.
West Bengal said it will incur a 5-billion-rupee loss by cutting sales tax on petrol to 20 percent from 25 percent earlier, and sales tax on diesel to 12.5 percent from 17 percent.
The benefit to consumers will range between 1.4 rupees to 2.1 rupees a litre, the government said in a statement.
Opposition-ruled Bihar has also cut sales tax on diesel by 1.64 percentage points to 18.36 percent and on petrol by 2.5 percentage points to 24.5 percent, nearly negating the fuel price hike.
Another communist-ruled state, Kerala, has also agreed in-principle to cut sales tax, but is expected to announce the change next week, a government official said.
India raised petrol and diesel prices by about 10 percent on Wednesday, its biggest increase in 12 years, as pressure of near-record high crude prices forced the government to cut back the mounting subsidy bill.
The move, which has already stirred political protests, is expected to drive inflation to a 13-year high of over 9 percent, analysts said.
Congress party president Sonia Gandhi has asked chief ministers in party-ruled states to also cut sales tax on petroleum products. The Maharashtra government, led by the Congress party, has already indicated a likely cut.
Nearly half of retail auto fuel prices in India comprise of duties and taxes, with sales tax, which varies in different states, ranging from 10 percent to 30 percent.
Prices eased earlier, weighed by India and Malaysia's move on Wednesday to raise retail fuel prices. They joined a growing number of Asian nations no longer able to afford big subsidies in the face of record oil prices.
India raised retail petrol and diesel fuel prices by about 10 percent and Malaysia hiked petrol prices by 41 percent. Taiwan, Sri Lanka and Indonesia reviewed their subsidies last month.
*
Government raises fuel rates were based on international crude price of $135 per barrel. The previous steep hike was in September 2006.
*
Government cuts 5% customs duty on crude, bringing the rate to 0% customs duties on petrol and diesel to 2.5% and ATF and naphtha for non-fertiliser use to 5 per cent.
*
Excise on petrol cut by Re 1 a litre to Rs 13.45, and on diesel to Rs 3.60.
*
Indian Oil, Bharat Petroleum and Hindustan Petroleum would have suffered a loss of Rs 2,45,305 crore. Hike will give them Rs 21,153 crore, government will forego Rs 22,660 crore.
*
Inflation may go beyond 10% because of the impact of the hike.
We are helpless. There was no other option as the losses of the oil companies were huge, ‘he petroleum minister, Mr Murli Deora, said at a press conference while announcing the hikes. The price of kerosene, the so-called poor man’s fuel, was untouched. The Cabinet Committee on Political Affairs, which met in the morning, gave its approval. After the hike, petrol in New Delhi will cost Rs 50.56 per litre, diesel Rs 34.80 per litre and LPG Rs 344.75. The public sector oil companies will save about Rs 21,000 crores. All Opposition parties criticise hike. Left demands review, calls for agitation.
West Bengal, ruled by the central government’s communist allies, has cut sales tax on auto fuels by about 5 percent, in an effort to reduce the impact of Wednesday's fuel price increase.
West Bengal said it will incur a 5-billion-rupee loss by cutting sales tax on petrol to 20 percent from 25 percent earlier, and sales tax on diesel to 12.5 percent from 17 percent.
The benefit to consumers will range between 1.4 rupees to 2.1 rupees a litre, the government said in a statement.
Opposition-ruled Bihar has also cut sales tax on diesel by 1.64 percentage points to 18.36 percent and on petrol by 2.5 percentage points to 24.5 percent, nearly negating the fuel price hike.
Another communist-ruled state, Kerala, has also agreed in-principle to cut sales tax, but is expected to announce the change next week, a government official said.
India raised petrol and diesel prices by about 10 percent on Wednesday, its biggest increase in 12 years, as pressure of near-record high crude prices forced the government to cut back the mounting subsidy bill.
The move, which has already stirred political protests, is expected to drive inflation to a 13-year high of over 9 percent, analysts said.
India cuts petrol, diesel prices to rein in inflation
The Indian government, battling a galloping inflation, Thursday said it was cutting the prices of petrol and diesel by Rs.2 and Re.1 a litre respectively, aided by the decline in international crude oil prices.
The move followed some high-level talks Petroleum Minister Murli Deora had over the past week with ruling United Progressive Alliance (UPA) chairperson Sonia Gandhi, Prime Minister Manmohan Singh and Finance Minister P. Chidambaram.
Sonia Gandhi and Manmohan Singh were reportedly in favour of ensuring that since global crude prices had dropped, the burden on the common person should be eased to whatever extent possible, especially since inflation had risen to new peaks.
The reduction was to take effect midnight Thursday, with Deora indicating further cuts in the coming weeks. 'The finance ministry will decide the reduction of customs and excise duties in crude oil,' he said.
Petrol will now cost Rs.42.85 a litre in the national capital while diesel will retail for Rs.30.25 - in line with an IANS report last week. In June 2006, the government had hiked the prices of the two fuels by Rs.4 and Rs.2, respectively.
The decision has also left consumers happy.
'I have a budget of Rs.2,500 per month for petrol. Now, I'll be able to drive a little more,' said Moses Phillip, who works as a sales engineer in an electrical and electronics company.
'On Sundays, when I would ask my husband to take me out, high petrol cost was an excuse he would normally use. Now that there is some reprieve, I hope he doesn't find some other alibi to deny my kids and I some weekend outings,' said Swapna Gupta, a homemaker in east Delhi.
Thursday's decision also followed some tight monetary policy measures taken in the past weeks by the Reserve Bank of India (RBI) where the cash reserve ratio (CRR) and the repurchase rate on government securities were hiked.
According to petroleum ministry officials, while the cut in prices of diesel will mean a loss of Rs.2-Rs.2.5 a litre on diesel, the revised rate for petrol will mean a no-profit-no-loss exercise.
'The burden of this price reduction will be met partly by the revenue inflows and partly through oil bonds that have already been approved,' Deora told a press conference here.
He said out of Rs.283 billion worth of bonds approved earlier, Rs.191.5 billion had already been issued.
'We have kept our promise that if international crude oil prices come down, we will bring down retail prices. In fact, we hope to bring it down further to June 2006 levels,' Deora said.
In June 2006, when the last price increase was announced, the Indian oil basket was at $67 per barrel, which jumped to $75 by August. But since then there has been a consistent dip in the Indian basket pricing, down to $52 per barrel in recent weeks.
On the other hand, the annual rate of inflation based on the official wholesale price index moved up to 6.73 percent for the week ended Feb 3, from a level of 3.98 percent a year ago.
The petroleum ministry had done a study based on the refinery transfer price in the second week of January, which called for a cut of Rs.3.60 per litre in petrol, and Re.0.36 in diesel in the capital.
But officials said that even at the current global crude price of $56 per barrel, state-run oil marketing firms were incurring heavy under-recoveries on subsidised kerosene and cooking gas.
The move followed some high-level talks Petroleum Minister Murli Deora had over the past week with ruling United Progressive Alliance (UPA) chairperson Sonia Gandhi, Prime Minister Manmohan Singh and Finance Minister P. Chidambaram.
Sonia Gandhi and Manmohan Singh were reportedly in favour of ensuring that since global crude prices had dropped, the burden on the common person should be eased to whatever extent possible, especially since inflation had risen to new peaks.
The reduction was to take effect midnight Thursday, with Deora indicating further cuts in the coming weeks. 'The finance ministry will decide the reduction of customs and excise duties in crude oil,' he said.
Petrol will now cost Rs.42.85 a litre in the national capital while diesel will retail for Rs.30.25 - in line with an IANS report last week. In June 2006, the government had hiked the prices of the two fuels by Rs.4 and Rs.2, respectively.
The decision has also left consumers happy.
'I have a budget of Rs.2,500 per month for petrol. Now, I'll be able to drive a little more,' said Moses Phillip, who works as a sales engineer in an electrical and electronics company.
'On Sundays, when I would ask my husband to take me out, high petrol cost was an excuse he would normally use. Now that there is some reprieve, I hope he doesn't find some other alibi to deny my kids and I some weekend outings,' said Swapna Gupta, a homemaker in east Delhi.
Thursday's decision also followed some tight monetary policy measures taken in the past weeks by the Reserve Bank of India (RBI) where the cash reserve ratio (CRR) and the repurchase rate on government securities were hiked.
According to petroleum ministry officials, while the cut in prices of diesel will mean a loss of Rs.2-Rs.2.5 a litre on diesel, the revised rate for petrol will mean a no-profit-no-loss exercise.
'The burden of this price reduction will be met partly by the revenue inflows and partly through oil bonds that have already been approved,' Deora told a press conference here.
He said out of Rs.283 billion worth of bonds approved earlier, Rs.191.5 billion had already been issued.
'We have kept our promise that if international crude oil prices come down, we will bring down retail prices. In fact, we hope to bring it down further to June 2006 levels,' Deora said.
In June 2006, when the last price increase was announced, the Indian oil basket was at $67 per barrel, which jumped to $75 by August. But since then there has been a consistent dip in the Indian basket pricing, down to $52 per barrel in recent weeks.
On the other hand, the annual rate of inflation based on the official wholesale price index moved up to 6.73 percent for the week ended Feb 3, from a level of 3.98 percent a year ago.
The petroleum ministry had done a study based on the refinery transfer price in the second week of January, which called for a cut of Rs.3.60 per litre in petrol, and Re.0.36 in diesel in the capital.
But officials said that even at the current global crude price of $56 per barrel, state-run oil marketing firms were incurring heavy under-recoveries on subsidised kerosene and cooking gas.
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