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TIMES OF INDIA, NEW DELHI (20th Jan,2007): There's good news on the kitchen front.
Your cooking gas bill is unlikely to see any increase for the next three years, with the
government deciding to continue subsidy on kitchen fuels till March 31, 2010.
The oil ministry has set the ball rolling to seek Cabinet approval in this regard and is
suggesting changes so that the entire subsidy is borne transparently through the Budget.
The government's move isn't difficult to understand. The present arrangement to provide
dole for cooking fuels comes to an end on March 31. In the absence of subsidy, cooking
gas prices have to be raised by Rs 133 a cylinder and kerosene by Rs 14 a litre.
Such a sudden and big jump in prices of what oil minister Murli Deora described in his
October 2006 letter to finance minister P Chidambaram as "lifeline fuels" will be
politically suicidal.
In February 2002, the government had decided to lift control over pricing of
petroproducts. However, in view of the sensitive nature of kitchen fuels, it decided to
continue subsidy on cooking gas and kerosene at a specified flat rate. The caveat was
that the system would be phased out in 3-5 years.
But with oil prices more than trebling from their 2002 historical mean to $55-75 a
barrel range in recent times, the government feels it is necessary to keep holding
consumers' hand for three more years.
Along with the subsidy, the ministry will also continue till March 2010 the system of
sharing the burden on transporting fuels to far-flung areas with a view to preventing
distance adding to retail prices.
The government has not raised the price of cooking gas since November 2004 and kerosene
since April 2002, though international prices have risen substantially. At international
prices in December, each cooking gas cylinder should cost Rs 428.52 in Delhi and
kerosene Rs 22.90 a litre.
With the government and state-owned oil marketing companies sharing part of the burden,
these are being sold at Rs 294.75 and Rs 9, respectively. The 2006-07 Budget had
provided Rs 2,930 crore as dole for kitchen fuels.
But this money proved insufficient as the gap between cost of producing fuels and the
price these were being sold at widened due to sharp rise in international crude prices.
To cover the gap, the government decided to give bonds worth Rs 28,300 crore to oil
companies. Rs 14,150 crore worth bonds have already been issued, while the rest may be
recalculated as crude has come down to $52-53 a barrel.
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