Indecent proposal

Petrol and diesel will cost Rs 2.71 a litre and Rs 2.55 a litre more, as Finance Minister Pranab Mukherjee increased the customs and excise duties on both removing a concessionary regime set in place early last year when global oil prices shot up to $ 112 (Rs 5,020) a barrel. They have since stabilised at $ 75 (Rs 3,775) a barrel.

The hike in customs and excise duties virtually put the Kirit Parikh committee report on fuel pricing reforms in cold storage.The government, which faces a high deficit, has for a long time been providing substantial subsidies to consumers to prevent an increase in retain prices of these two fuels, even as global prices kept rising.

Petroleum Secretary S Sundareshan confirmed the hike in customs and excise duties in the Budget would be passed on to consumers.

In the Budget, Customs duty on petrol and diesel has been raised to 7.5 per cent from 2.5 per cent. Excise duty on both has gone up by Re 1 per litre.

Mukherjee said this had to be done to bring fiscal deficit within manageable limits. Prime Minister Manmohan Singh said the economy had the capacity to absorb the impact of the hike.

"Increase in petrol and diesel prices will lead to inflationary pressures,” said Rajiv Kumar, director and chief executive ICRIER.

But if inflation is a concern, so is the fiscal deficit.

The hike in customs and excise duties virtually put the Kirit Parikh committee report on fuel pricing reforms in cold storage. The expert group had recommended freeing of petrol and diesel prices, which would mean a further increase of Rs 4.94 a litre in petrol price and Rs 3.20 per litre hike in diesel.

There will be no change in the prices of cooking gas (LPG) and kerosene.

- Indian Writer.