Fuel price hike almost inevitable: CII

New Delhi, Jan 2 (UNI) CII today favoured a hike in retail prices of oil but said the burden should be borne equally by the government, oil marketing companies and consumers.

The chamber made out a case for examining the duties -- custom and excise -- and said the hike should be carried out in a manner that it does not hurt the corporate sector or the economy in general.

It noted that spiralling crude oil prices at about 94 dollars a barrel combined with the country's high import dependence is leading to an unsustainable situation and a retail price hike seems almost inevitable.

''Further delay in oil price revision is inadvisable, as it would only make the impact that much worse,'' said a statement.

However, CII suggested that any such revision has to be in a manner such that no sector gets into any undue disadvantage, and that the industry and the economy has time to absorb and adapt to the effects of such a price revision.

From that point of view, the decision should be a mix of fiscal and price measures, such that the ultimate impact on retail price is moderate, it added.

CII has also asked for rationalisation of taxes and levies on petroleum products.

The current levels of low inflation and sufficiently high growth makes it possible for the government to take a bold decision.

However, it must not create a den on the Indian growth story, the statement said.

It added that this was also a good time to take a hard look at the subsidy imbalance and start taking steps towards correcting those over a period of time.

According to CII, the international situation presents a grim outlook on oil prices, as no significant softening seems to be in the offing.

The chamber pointed out that historically there has never been a direct pass through of international prices into the Indian retail market for good reasons. ''However, given the current prices in the international market, this extent of insulation may no longer be possible for a variety of reasons,'' the chamber said in a statement.

The two most compelling reason, CII said is that the burden of insulation for the government is becoming unsustainable, and the second is that eventually a play of market dynamics would be the best trigger for prompting conservation.

The chamber said India has to, over time, look at reducing its import dependency, which currently stands at 70 per cent.

To achieve this, comprehensive conservation measures should be stressed upon, which are being adopted by all sections of society including industry.

The body also advocated proactive conservation measures so that the country can look at a tangible target of reducing oil consumption.

It suggested the government of setting a target of curtailing domestic consumption by 10 per cent by 2010.

CII also calibrated suggestions for short term which included correcting distorted Petroleum Product Pricing in line with the recommendations of the Rangarajan Committee; better traffic management; switch over to piped Natural Gas in Metros; Upgradation and revamping of refining operations, and; Organisation of people awareness programmes on petroleum conservation, among others.

For the Medium term, the five key recommendations include technology upgradation at the future refinery augmentation, intensification of domestic exploration and production efforts, use of bio-fuels like ethanol doping of petrol and bio diesel, usage of CNG for public transportation and acceleration of the rural electrification programme.

The five key long-term suggestions include strategic storage initiatives, greater thrust for the coal sector, comprehensive combined heat and power (CHP) policy; further development and electrification of the railway network and systems, particularly in the freight corridors.

The chamber aslo called for continuing R&D and commercialisation strategy for pursuing technologies like coal-to-liquid, gas-to-liquid, and underground coal gasification and hydrogen.

CII would also engage in proactive measures to suggest and facilitate implementation of various conservation measures in the user segments, in order to bring about significant demand side management, which would include measures like policy on alternate fuel usages (like bio-mass, bio-fuel); energy efficient furnaces and boilers.

UNI SR PBB KN1705