Cut in petro price to offset Rs 40 hike in LPG: Sinha

Finance Minister Yashwant Sinha said on Friday that the price hike in domestic gas would be more than compensated by the cut in petrol and diesel prices, while reducing government's burden on subsidies by Rs 80 billion.

"For every LPG cylinder the government has to provide a subsidy of Rs 95 per LPG cylinder. As the burden of subsidy on LPG is now taken into the government's Budget and the subsidy has to be given from our resources, it was important to reduce the subsidy by Rs 40," Sinha told reporters on the sidelines of a Federation of Indian Chambers of Commerce and Industry seminar on Budget.

"Even my wife is not happy about the price hike of LPG by Rs 40 per cylinder. But when I explained the compulsion then she understood the rationale for the price hike. I feel all consumers would understand this," Sinha said.

He explained that by reducing petrol prices twice by Re 1 each in the Budget and in January, consumers using 20 litre of petrol in conveyance would be relieved by a minimum of Rs 40 every month, which compensates the Rs 40 hike in LPG.

"If we hadn't reduced the subsidies on LPG and kerosene through the price hikes, the government would have been saddled with additional burden of Rs 80 billion," Sinha said, adding, "we have provided Rs 65 billion subsidy for these two items."

"How would these funds come?" he questioned and said it would have increased the fiscal deficit further from the projected 5.3 per cent for 2002-03.

"The price cut in diesel would benefit the entire industry and the economy," Sinha added.

Sinha rules out roll back of LPG, kerosene prices

Sinha also ruled out any rollback of LPG and Kerosene price hiked in the Budget, saying it is not a "bitter pill" nor inflationary. Sinha said, if the prices of kerosene and LPG had not been hiked in the Budget, the subisidy component would have gone up from Rs 65 billion to Rs 145 billion.

In the case of kerosene, Sinha said there was large-scale misuse.

According to a study average consumption of kerosene by a family in rural areas is just 7-8 litres per month but in reality it worked out to about 50 litres per month.

This was because of a large-scale diversion of kerosene for adulteration and Rs 1.50 per litre increase in the prices of kerosene would prevent to some extent the misuse.

Also Sinha said reduction in diesel prices by 50 paise in the Budget would help in keeping prices under control with inflation already at a record low of about one per cent.

PTI

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