New Delhi: As India moves towards complete deregulation of the petroleum sector from April 2002, the government is yet to decide how the existing subsidies on kerosene and cooking gas would be cut without hiking their prices.

According to a four-year schedule framed in 1998-99 for axing all subsidies on petroleum goods, prices of kerosene and liquefied petroleum gas (LPG) or cooking gas should have risen 30 per cent annually. This did not happen as New Delhi continued to retain the subsidies.

The Petroleum Ministry is yet to work out with the Finance Ministry how the rollback in subsidies is to be done so that by March 31, the subsidies cover only up to 15 per cent of the import-parity price of LPG and 33 per cent of kerosene price.

The ministry is hopeful of placing the roadmap for decontrol in Parliament during the monsoon session beginning in July. The roadmap will deal with marketing aspects but let the Finance Ministry tackle the issue of oil pool deficit and the subsidy rollback on kerosene and LPG, official sources said.

Unlike the decontrol of aviation turbine fuel from April 1 this year, the decontrol of kerosene and LPG, besides diesel and petrol, would affect both the common man and industries. Prices of petroleum products were last hiked in September.

The subsidies have resulted in a deficit in the oil pool account estimated to cross Rs 185 billion when the current fiscal year ends in March 2002.

Since the oil pool account will cease to exist by April 2002, the only other alternative with the government would be to pass it on to the general Budget.

In the deregulated scenario, marketing rights of petroleum products will rest with oil companies investing Rs 20 billion in domestic refining capacity or creating facilities to produce three million tons of crude oil.

India Abroad News Service