Fuel prices in the country are set to increase with Finance Minister Pranab Mukherjee on Friday announcing restoration of basic duty on petrol, diesel and crude petroleum and a rise of Re 1 in central excise duty.
In his Budget speech 2010-11, Mukherjee said the government had exempted fuel from basic customs duty to give relief to the oil marketing companies. The global oil prices rose alarmingly to $112 per barrel last year.
But, with global prices comparatively low right now, the government has taken the step to improve the fiscal position by restoring basic duty and increasing excise duty.
"In view of the pressing need to move back to a fiscal consolidation path, I propose to restore the basic duty of 5 per cent on crude petroleum; 7.5 per cent on diesel and petrol and 10 per cent on other refined products. I also propose to enhance the central excise duty on petrol and diesel by Re 1 per litre each," said Mukherjee.
This provoked loud protests from the opposition parties who walked out from the Lok Sabha.
Mukherjee also made a special mention of the Kirit Parikh committee which submitted its report recently on a viable and sustainable system of pricing of petroleum products.
It had recommended price deregulation of petrol and diesel, as well as a sharp decrease in subsidy of cooking gas and kerosene. However, the government has so far dithered on implementing the recommendations, expecting a political fall-out due to rising inflation.
"Decision on these recommendations will be taken by my colleague, the minister of petroleum and natural gas, in due course," said Mukherjee.
The total under-recoveries of the oil marketing companies are expected to reach Rs 40,000 crore this year, with the government not willing to go by the earlier formula of providing oil bonds. Instead, the finance ministry has only given Rs 12,000 crore in cash so far.