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Press Note

The Cabinet Committee on Political Affairs (CCPA) met on 13thSeptember, 2012 under the chairmanship of the Prime Minister to consider the disturbingsituation arising out of projected massive under-recoveries of Rs. 1,87,127 crore for the financial year 2012-13 in the wake of high international crude oil prices and sharp depreciation of Indian Rupee against US Dollar. The uncompensated under-recovery causes loss tothe Public Sector Oil Marketing Companies (OMCs). The CCPA took the following decisions to be implemented with effect from the midnight of 13/14 September 2012 :

a) 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 beaboveRs. 1,03,000 crore. The revised RSP of Diesel in Delhi will be approximately Rs 47 per litre. Further, branded Diesel will be sold at the market rate.

b) No increase in the price of Petrol, although the current under-recovery on Petrol is about Rs 6 per litre. The consequent loss to the OMCs will be offset through reduction in Excise Duty on Petrol by Rs 5.30 per litre.

c) Restrict the supply of subsidized LPG cylinders to each consumer to6cylinders (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 subsidized LPG cylinders available to each consumer in the remaining part of the current financial year will be 3 cylinders.While subsidized cylinders will continue to be available at Rs. 399 per cylinder (at Delhi), the market rate of LPG cylinders at non subsidized rates will be notified by the OMCs on monthly basis.

d) No increase in the price of PDS Kerosenewhich is currentlyRs. 14.83 per litre (at Delhi). The under-recovery of the OMCs on sale of Kerosene during 2012-13 will continue to be about Rs.32,000 crore.

It may be recalled that the Department Related Parliamentary Standing Committee on Petroleum & Natural Gas (which has members from all Political Parties) made recommendation on capping of subsidized LPG cylinders to 6 per annum.

The effect of capping supply ofsubsidized LPG cylinders at six per annum will lead to saving of subsidy on one third of the total LPG cylinders.Two third of the total cylinders will still be supplied at subsidized rate. About 44% 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 subsidized 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.

RCJ/Petro-price
(Release ID :87740)