Alarmed over the hike in petrol and diesel prices off-late, the government said it is working on a long-term solution to address the volatility and frequent revisions in rates. The rates have gone up by Rs 2.54 a litre in case of petrol and Rs 2.41 in diesel in a hike witnessed after a 19-day freeze in revising rates before Karnataka went to polls.
“The government is keen that instead of having an ad hoc measure, it may be desirable to have a long-term view which addresses not only the volatility but also takes care of the unnecessary ambiguity arising out of frequent ups and downs. That process is underway,” Union minister Ravi Shankar Prasad said on Wednesday after the cabinet meeting.
The Centre had in June last year junked a 15-year old practice of revising rates every fortnight and introduced daily revisions which worked well except periods immediately preceding an election.
The hike in fuel price has also led to the criticism by the Opposition parties, some of whom have held protest.
“(The) issue of frequent hike in fuel price is a matter of debate and concern. The government is involved in this whole process, including the concern (about rise in prices) and also the uncertainty,” Prasad had said.
Since May 14 when the state-owned oil firms ended a 19-day pre-Karnataka poll hiatus on revising fuel prices, petrol and diesel rates have been revised everyday, leading them to record highs. Petrol costs Rs 76.17 per litre in Delhi while diesel sells for Rs 68.34.
State-owned Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) were in April 2002 given freedom to revise rates of petrol and diesel on 1st and 16th of every month based on average rate of benchmark international petroleum product prices and rupee-US dollar rates in the preceding fortnight.
The UPA government finally freed petrol price in June 2010 and the diesel rates were decontrolled by the current BJP government in November 2014.
Prasad said the government had allowed complete freedom on pricing and on many occasions prices went down considerably. There are indications that a cut in excise duty combined with states being asked to reduce VAT is on the cards.
The central government levies Rs 19.48 excise duty on a litre of petrol and Rs 15.33 on diesel. State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up.
(With inputs from PTI)