GOVERNMENT FINALISES MECHANISM TO HANDLE OIL MARKET VOLATILITIES
OIL COMPANIES ANNOUNCE INCREASE
IN THE CONSUMER PRICES OF PETROL AND DIESEL
Shri Ram Naik, Minister of Petroleum and Natural
Gas announced the Government scheme for dealing with the price
volatility in the international oil market at a Press Conference
held here today. He informed that in pursuance of the scheme,
the Department of Revenue would reduce the excise duty on diesel
from the existing 16 per cent to 14 per cent and on petrol from
the existing 32 per cent to 30 per cent.
Shri Naik informed that in a meeting of the officers
of the Petroleum Ministry and the oil companies held today, the
Government scheme of duty adjustment was conveyed to the oil marketing
companies. Oil companies in turn informed the Government that
after factoring into the impact of the duty reductions, the revised
prices of petrol and diesel will be brought into effect from the
midnight of 3rd and 4th June 2002. The increase
in the consumer price of petrol will be of around Rs.2.50 per
litre and of diesel around Rs.1.50 per litre. These prices will
apply in states having sales tax on petrol at 25% and on diesel
at 20%. In places where sales tax rates are different, the increase
would be lower or higher depending on the tax rates (New prices
in metro towns at Annexure). Companies would make further adjustments,
upward or downward, on fortnightly basis with the changes in the
refinery gate prices which are fixed in line with the international
oil prices. With this, the domestic prices of retail petroleum
products in the country will get aligned with the international
prices, in line with the practice obtaining in other de-regulated
economies.
The excise duty rates would be reviewed every
quarter in the light of international oil prices, retail selling
prices of petrol and diesel, their financial impact on the domestic
market and other economic factors. After considering all these
aspects an appropriate duty adjustment will be made, if required.
The next review would fall due in September 2002. Due to excessive
volatility in the international oil market such a review could
be held earlier also. This mechanism would ensure, Shri Naik said,
protection to the domestic consumers from the international oil
market price volatilities.
With a view to facilitate a smooth transition
from the administered pricing mechanism (APM) regime to the market
determined pricing regime, oil companies had withheld the upward
revision in the consumer prices of petrol and diesel in spite
of about 25% increase in the oil prices. It may be mentioned that
the average crude oil price at the time of last revision in the
consumer prices on 1st March 2002 was between US Dollar
19-20 per barrel. The average oil price during April-May 2002
increased to about US Dollar 25 per barrel (Oil price stands at
Annexure-II). The Government have also decided to compensate the
oil marketing companies for the financial burden, estimated to
be around Rs.2000 crore, they are carrying due to non-revision
in the consumer prices over past two months. For this purpose,
a mechanism will be announced shortly.
It may be recalled that the Government had, at
the time of taking decisions to dismantle the APM, announced that
it would put in place a mechanism to contain the impact of price
volatilities in the international oil market on domestic prices.
With the announcements made today, this earlier decision has been
implemented, said Shri Ram Naik.
Annexure-I
INDICATIVE RETAIL SELLING PRICES IN FOUR
METROS AFTER THE PROPOSED REVISION
PETROL
(Rupees per litre)
|
Metro Town
|
Existing Price
|
Revised Price
|
Increase
|
Sales-tax rates
|
|
Delhi
|
26.54
|
28.94
|
2.40
|
20.0%
|
|
Mumbai
|
30.78
|
33.47
|
2.69
|
34.4%
|
|
Kolkata
|
26.99
|
29.39
|
2.40
|
20.0%
|
|
Chennai
|
28.49
|
31.05
|
2.56
|
28.0%
|
DIESEL
(Rupees per litre)
|
Metro Town
|
Existing Price
|
Revised Price
|
Increase
|
Sales-tax rates
|
|
Delhi
|
16.59
|
17.99
|
1.40
|
12.0%
|
|
Mumbai
|
21.10
|
22.85
|
1.75
|
40.0%
|
|
Kolkata
|
16.97
|
18.38
|
1.41
|
12.5%
|
|
Chennai
|
18.10
|
19.63
|
1.53
|
22.0%
|
Annexure-II
MOVEMENT IN THE AVERAGE OF CRUDE OIL PRICES
OF INDIAN BASKET
|
Month
|
Average Price ($ per barrel)
|
|
February 2002
|
19.58
|
|
March 2002
|
23.33
|
|
April 2002
|
25.02
|
|
May 2002 (till 30th May)
|
25.05
|
