Govt Tries Balancing Act To Protect Consumers And Burdened Oil Companies Rajeev Jayaswal NEW DELHI THE government is working on a dual strategy of fuel price hikes coupled with duty cuts to shield consumers and cash-strapped oil companies. The finance ministry has asked the petroleum ministry to chalk out various scenarios of duty rationalisation and their impact on both oil companies and the exchequer. An excise duty cut on petrol or diesel would offset a price hike and ease the burden on the consumer. This move will also be more politically palatable in the wake of Sunday's Karnataka poll results. Sources said petroleum minister Murli Deora will meet finance minister P Chidambaram on Tuesday. Confirming the meeting, Mr Deora told ET: "IOC, BPCL and HPCL have done a commendable job in distributing sensitive fuel products nation-wide. They now need help. We will protect them at whatever cost. I am meeting FM and he has assured that he would do whatever possible.' It is also learnt that PM's economic advisory committee (EAC) chairman C Rangarajan and Mr Deora have already deliberated the issue. Prime Minister Manmohan Singh too had met Mr Deora last Friday to take stock of the situation. The finance ministry has asked the oil ministry to explain the projected underrecoveries of about Rs 230,000 crore for 2008-09. Mr Chidambaram's ministry is expected to strike a balance between bailing out oil marketing companies (OMCs) and arresting the exchequer's losses. The oil ministry, on its part, is re-examining its demand to reduce Customs duty on petrol and diesel from 7.5% to 2.5% and crude oil from 5% to zero after the finance ministry's directive. It may also seek an excise duty cut on the two fuels. Duty rejig alone of little help IOC, BPCL and HPCL, meanwhile, have raised the security deposit for new cooking gas connections by Rs 400/cylinder, taking it to Rs 1,250. The hike is due to high steel cost in making cylinders. The refundable amount, however, would help the companies to generate about Rs 250 crore annually. Sources also said the duty rejig alone would not help much. "Even if the excise duty is slashed by 50%, it would amount to a reduction of OMCs' underrecoveries by Rs 26,000 crore. Marketdetermined petrol price (a hike of Rs 16/lt or so is desired) would help in reducing under-recoveries by around Rs 20,000 crore. Besides, a marginal increase in prices of diesel and LPG is also required,' a source said. A Re 1/lt price hike on petrol and diesel would fetch OMCs annual savings of Rs 1,272 crore and Rs 5,352 crore. A Rs 10/cylinder hike in LPG prices would save Rs 756 crore annually.