Even as the government faces the ire of common man and various political parties over increase in diesel prices and capping domestic, the Ministry of Petroleum and Natural Gas on Monday explained the reasons that forced the government to go ahead with the unpopular moved.
The government detailed the reasons in front page advertorials in leading newspapers.
The projected massive under-recoveries for the financial year 2012-13 stands at Rs 1,87,127 crore in the wake of high international crude oil prices and sharp depreciation of Indian Rupee against US Dollar.
India imports 74 percent of crude oil at international rates and in the wake of increasing crude oil prices and fall in rupee the government had to increase the domestic prices.
Restricting the supply of subsidised LPG cylinders to each consumer to 6 cylinders (of 14.2 Kg) per annum. This will help in reducing the under-recovery by about Rs 5,300 crore for the remaining part of the financial year. The under-recovery on sale of Domestic LPG during 2012-13, even after this measure, is estimated to be above Rs 32,000 crore. Any number of cylinders will be available over and above the cap of 6 cylinders at market rate. The number of subsidised LPG cylinders available to each consumer in the remaining part of the current financial year will be 3 cylinders.
About 44 percent of the total Domestic LPG consumers, who consume 6 cylinders or less per annum, will not be affected by this decision. Capping of cylinders will also lead to reduction in misuse/diversion of subsidised cylinders.
The above decisions will reduce the under-recovery of OMCs by about Rs 20,300 crore and the under-recovery for 2012-13 will be about Rs 1,67,000 crore which is more than the under-recovery of Rs 1,38,541 crore incurred by OMCs during 2011-12.
The recent increase in the price of diesel will alone yield an additional tax revenue of about Rs 82000 crore per annum to the states. The states can, therefore, at least forego this additional revenue to provide additional comfort to the common man. Increase in price of Diesel by Rs 5 per litre excluding VAT. Out of this, Rs 1.50 per litre is on account of increase in Excise Duty. The balance increase of Rs 3.50 per litre will reduce the under-recovery of OMCs by about Rs 15,000 crore for the remaining part of the current financial year. The under-recovery on sale of Diesel during 2012-13, even after this price hike, is estimated to be above Rs 1,03,000 crore.