Government fuels another fire, now set to ration Liquefied Petroleum Gas

After weeks of deliberations, the Cabinet Committee on Political Affairs met on Wednesday to to consider a hike in fuel prices and announce its decision.

For the Government, already reeling under losses in state elections, it is a difficult decision to make.

Oil companies have been suffering huge losses, to the tune of Rs 225,000 crores per year.

The Government is set to make an announcement at noon on the fuel price hike.

Wednesday night will also see Prime Minister Manmohan Singh addressing the nation to explain the reasons for the hike, a second since the year began.

The proposed hike may be to the tune of Rs 3 per litre for Petrol and Rs 2 per litre for Diesel.

The Government has three options to choose from:

• Hiking diesel and petrol prices by about Rs 2 to 5 rupees per litre, along with a marginal cut in customs duty on crude.
• Hiking the prices by Rs 1 to 3 and cut customs duty on crude by five per cent.
• Raising petrol prices alone by Rs 3 per litre along with cuts in customs duties on crude and petrol and lowering of excise duty on certain petroleum products.

For liquefied petroleum gas (LPG), however, the Government’s plans are different.

A new distribution process for LPG has been announced – eight gas cylinders per year at current year extra to cost double.

Even though the prime minister says he does not favour going back to the era of blind market controls,

Petroleum Minister Murli Deora has indicated that there will now be a quota on LPG cylinders, this despite the PM having earlier stated that he does not favour returning to an era of blind market controls.

Deora proposed that people who have LPG connections would get only 8 cylinders per year at the current rate, no matter the size of the household. If extra cylinders are required, one would have to pay double the rate.

The move will, in all probability, lead to huge opposition across the country and may perhaps sound the death knell of the UPA Government.

While the Government is gearing up to take this critical decision, international crude oil prices have continue to fall after touching the peak of above $135 a barrel on May 22.

Crude oil futures dipped below $127 a barrel on Tuesday, despite worries that supplies are barely meeting growing global demand.

However, prices did edge higher on Monday on concerns about heating oil supplies after OPEC official said there is no need for the cartel to pump more oil.

Though typically a see-saw battle, some have seen this an opportunity to buy as global demands remain tight and supply remains restrained.