People's Democracy

IN the Budget speech the finance minister announced dismantling of Administered Pricing System (APS) of petroleum products from April, 2002 based on what he called a decision of the erstwhile UF government in 1997. As a matter of fact, Ram Naik, minister of petroleum & natural gas had been telling publicly about the same justifying the abnormal price hike on petroleum products since coming of the Vajpayee government at the centre in 1998. What he did not say is that the decision which was opposed by the Left at the time of the UF government also, at least contained a very significant reduction in duty structure.

As per the United Front government decision, in the terminal year of 2001-02 before dismantling the APS, import duty on crude was proposed to be 0 to 5 per cent and the excise duty on LPG and kerosene was to be maintained at 10 per cent. In Yaswant Sinha’s Budget, the import duty on crude has been kept at 10 per cent whereas the excise duty on LPG & kerosene has been pegged at 16 per cent. While dismantling the APS but ignoring the duty structure as proposed by the UF government, this anti-people government has, therefore, imposed an extra tax burden ranging from Rs 2500 crore to Rs 5000 crore towards import duty plus an additional excise duty of 8 per cent which means an extra amount of Rs 1300 crore (Rs 700 crore on LPG and Rs 600 crore on kerosene).

But the real fraud lies in the increase of cess on indigenously produced oil by ONGC & Oil India Ltd. Mind you, this cess is not applicable to private oil producers like Reliance, Enron/British Gas etc. The cess has been increased from Rs 9000 to Rs 18000 per ton merely as a passing reference in part ‘B’ of the Budget speech by the finance minister. What is the implication? This means from the indigenous crude oil production the government would earn annually an additional amount of around Rs 27000 crore. The Oil Industry Development Act, 1974 based on which the cess is being charged, specifically states that "the cess collected under this provision would be made available to the development of petroleum sector". As a matter of fact, out of the net collection of cess of Rs 36000 crore as on March 2000 since enactment of this Act, an amount of only Rs 902 crore had been released by the government to the Oil Industry Development Board as per the Act and the balance money has become a part of Consolidated Fund of India under finance ministry.

Now, when the petroleum sector has been deregulated and opened for private sector, is there any justification of continuing this cess at all? When the government shouts from the roof top that the State is withdrawing itself from the oil sector and opening the same to the private as more finance would be brought in by the private investors, its double-speaking character gets totally exposed through this enhancement of cess by 100 per cent for additional collection of Rs 2700 crore just to make up its fiscal deficit. If the market has to decide the price of petroleum products, why should the consumers carry the burden of Rs 5400 crore towards cess imposed by the State and not the market?

After increasing the price of LPG by Rs 400 per cylinder and kerosene by Rs 1.5 per litre, the government claims that still it has to give a subsidy of Rs 6500 crore to the LPG and kerosene consumers. Even if we take this statement of the government as true, which it is not, the additional amount collected from these consumers by the government through taxes as enumerated above are summarised in Table 1.

Thus the additional amount, slyly collected by the government, is more than its own estimated ‘Subsidy’ (!)

Interestingly the quantum of subsidy (as given in a written note submitted by ministry of petroleum & natural gas) was shown Rs 3773 crore for kerosene and Rs 1261 crore for LPG, way back in 1993-94, which means a total of Rs 5034 crore. Compared to 1993-94, the price of kerosene after Sinha’s Budget has become four times higher and that of LPG has gone up by two and a half times. What is the mystery that inspite of the big price hike the subsidy instead of decreasing goes on increasing? It is simply because the taxes and other contributions to the central exchequer from oil sector have been increasing manifold and based on the excess money received from the consumers, the production cost of petroleum products is being enhanced and subsidy manipulated to show high to cover up the budgetary deficit at the cost of the people.

Table 2 shows how money is being collected from the oil sector to cover up budgetary deficit:

Add to the above the following cases of swapping of shares between public sector oil companies in the name of disinvestment/strategic sale. The amount is a staggering Rs 7208 crore:

1999-2000        Rs 5400 crore (cross holding of shares between IOC, GAIL & OIL)

2000-2001         Rs 658 crore (Strategic Sale of BRPL & CPC to IOC)

2001-2002    Rs 1150 crore (Strategic Sale of IBP to IOC)

                            Rs 7208 crore

The above sale or merger could have been through mere paper adjustment of balance sheet as President of India holds the shares of all the above PSUs. But NDA government true to its character assiduously bled the reserves of these public assets to make up its budgetary deficit.

The moot question arises as to "who is subsidising whom"? Is it the oil sector and hence the consumers which is subsidising the finance minister’s deficit budget or otherwise. There is therefore no question of a partial roll back on price of kerosene and LPG. This should be brought back to pre-budget level, customs and excise duty revised and government should make public the cost sheet showing in chronological order the basic production cost of crude oil (both indigenous and import) up to the retail price showing the subsidy element, if any. That will reveal the petroleum fraud inflicted on the people of this country by this government.