Petroleum Minister Mani Shankar Aiyar is expected to suggest a steep hike of up to Rs 50 per cylinder in domestic LPG price and two different rates for kerosene from 2006 to cut losses the oil firms incur on selling the two mass-consumed cooking fuels.
Aiyar is likely to tell the high-powered Energy Coordination Committee, chaired by Prime Minister Manmohan Singh, next Friday (December 16) that the over Rs 110 per cylinder loss on selling domestic LPG can be bridged by raising price by Rs 50 on January 1 and then again on July 1 next year.
A top petroleum ministry official said he was also likely to suggest that kerosene be priced differently for people living below the poverty line (BPL) and those above it.
Price of kerosene sold to BPL families through the PDS system is suggested to be increased by Re 1 a litre to Rs 10 per litre while the same for APL families will be priced at Rs 15 a litre. This would be raised to Rs 18 by year-end.
The ECC has asked Aiyar to make presentation on three items -- issues arising from murder of IOC officer Manjunath and steps to curb adulteration of diesel with kerosene; pricing of petroleum products; and domestic oil production.
However, Aiyar's price hike proposal may not be accepted by the prime minister considering the political ramifications in a year when four crucial states go to polls.
Besides, the Cabinet had last time shot down his proposal to raise LPG price by a mere Rs 5 a cylinder.
Aiyar has also been advised not to make any suggestions on pricing of petroleum products as the committee headed by Economic Advisory Council chairman C Rangarajan was to make a presentation on the issue.
The official said Aiyar's proposal for a price hike would also not hold water considering the fact that finance ministry is to issue bonds worth Rs 6,000 crore (Rs 60 billion), covering half of the losses on selling petrol, diesel, LPG and kerosene the oil firms are to make in 2005-06 fiscal, later this months.
On petrol and diesel, things were pretty comfortable. Oil firms were making Rs 0.10 a litre on selling petrol but were incurring a loss of Rs 0.70 per litre on diesel.
Aiyar's idea of dual pricing of kerosene was its use as adulterant in diesel, a problem Manjunath had sought to deal with when he was allegedly killed by a petrol pump owner.
However, this would not be enough for two reasons, the official said. For one the nil excise and customs duty were available only on PDS kerosene and the moment it was sold
outside the PDS system (to APS families), it would attract 8 per cent excise duty.
Besides, the Rs 15 a litre price was hardly a deterrent for adulterants as the price differential between kerosene and diesel would still remain at close to Rs 17 per litre.
