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PMO to decide whether global oil price is volatile

Pradeep Puri

The finance and petroleum ministries are grappling with the meaning of "volatility" in international price of crude before deciding on a possible excise cut for petroleum products.

While the petroleum ministry believes the 38.5 per cent spurt in the international price of crude, from $19.50 a barrel to $27 a barrel within a month, is "volatile", the finance ministry thinks this is a "normal variation".

The issue is expected to be resolved by the Prime Minister's Office, which is concerned at the impact of the high international prices of crude on the Indian economy.

The PMO is believed to have advised the finance ministry to keep a close watch on the international price of crude and take remedial measures before the situation gets out of hand.

Petroleum minister Ram Naik has also written to Finance Minister Yashwant Sinha to adjust duties in a manner that does not force the oil companies to bear the entire impact of the international price-rise. Naik has pointed out if proper fiscal measures are not taken immediately, oil companies may increase the prices of petroleum products.

However, enthused by the unexpected spurt in its revenue collection following the increase in global oil prices, the finance ministry is learnt to be averse to taking any step that may have a negative impact on accruals.

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