Dear fellow Indian citizens, get ready!Diesel, LPG rates may go up if govt approves Kelkar panel report. It is almost a certainty to ensure the growth story to continue!

Dear fellow Indian citizens, get ready!Diesel, LPG rates may go up if govt approves Kelkar panel report. It is almost a certainty to ensure the growth story to continue!

Indian Holocaust My Father`s Life and Time,Chapter: Nine Hundred Forty Five

Palash Biswas

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Dear fellow Indian citizens, get ready!Diesel, LPG rates may go up if govt approves Kelkar panel report. It is almost a certainty to ensure the growth story to continue!Tax concession sought for social sector, but nothing to cheer as it means pure business. The market has to expanded in rural poor India and hence, it is necessary to ensure the flow of purchasing power, the cash. It has nothing to do with trickle trickle economics either.Rather India Incs and MNCs have a point to cheer up as The government will soon send its comments to the Reserve Bank on issuing new bank licences, Finance Minister P Chidambaram said today.

"We are sending our comment on banking licence to RBI," he told reporters here.

RBI is preparing final guidelines for issuance of new bank licences after Parliament approved Banking Laws (Amendment) Bill last month.

The Bill, now approved, aims at strengthening banking regulation. It allows RBI to supersede boards of private banks and increase the cap on voting rights of private investors in public sector banks to 10 per cent, from 1 per cent now.

As per the draft guidelines on new bank licences, business houses with successful track record and a minimum capital of Rs 500 crore will be allowed to set up commercial banks. Currently, the minimum capital requirement for opening a bank is Rs 300 crore.

The draft guidelines said companies which are primarily engaged in the real estate business or stock broking will not be eligible for promoting bank.

"Entities or groups having significant (10 per cent or more) income or assets or both from real estate, construction and broking activities individually or taken together in the last three years will not be eligible to set up new banks," the draft said.

On foreign holding, it said the aggregate non-resident shareholding in the new bank should not exceed 49 per cent for the first five years.

At present, the foreign shareholding in private sector banks is allowed up to 74 per cent of the paid-up capital.

Over the last two decades, the RBI licensed 12 banks in the private sector in two phases -- 10 in 1993 and two later.

There are 26 public sector banks, seven new private sector banks, 15 old private sector banks.

Diesel, kerosene and cooking gas LPG prices may be hiked soon as the government considers Vijay Kelkar Committee recommendations on cutting fiscal deficit.  The oil ministry has moved two separate cabinet notes - one to raise cap on supply of subsidised cooking gas cylinders and the other to increase fuel prices, particularly diesel, by less than a rupee per month to pair it with market rates and eventually deregulate it in next 15 months.Economic Times reports.



The Kelkar Committee, which was appointed by Finance Ministry to suggest a roadmap for fiscal consolidation, has suggested immediate hike in fuel prices and complete deregulation of diesel prices by start of 2014-15 fiscal. It also suggested raising kerosene and LPG rates.

"That (Vijay Kelkar committee recommendation on deregulating diesel and raising kerosene and LPG rates) is a proposal. It is still at proposal stage. The (Petroleum) Ministry is only processing that report and we are yet to take a decision," Oil Minister M Veerappa Moily told reporters here.

Though the Minister did not indicate a price hike soon, officials speaking on condition of anonymity said a proposal based on Kelkar Committee recommendations will be taken to Cabinet soon and rates will go up if it is approved.

The panel had in September recommended "immediate increase in Petroleum prices. This should be continued in the next year in such a way that the prices of diesel are fully deregulated by the start of 2014-15. The prices of kerosene and LPG also should be revised regularly to keep the subsidy levels at affordable levels."

Price of diesel, which currently costs Rs 47.15 per litre in Delhi, was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. Kerosene rates have not changed since June 2011 and it currently costs Rs 14.79 per litre in Delhi.

State-owned oil companies currently sell diesel at a loss of Rs 10.16 per litre, kerosene at Rs 32.17 a litre and LPG at Rs 490.50 per 14.2-kg cylinder. Moily said the government was also considering raising the cap on supply of subsidised cooking gas (LPG) cylinders to 9 per household in a year from current limit of six.

The hike in supply of subsidised cylinders would lead to an additional Rs 9,000 crore of subsidy payout over and above the Rs 155,313 crore that the government is currently having to deal with on sale of diesel, LPG and kerosene at below market price.

Since the Finance Ministry is unwilling to foot this, the only option left is to raise fuel prices, officials said adding a hike in diesel, kerosene and LPG rates would be taken to the Cabinet. The Kelkar committee had recommended an immediate hike in price of diesel by Rs 4 per litre, of kerosene by Rs 2 a litre and of LPG by Rs 50 per cylinder.

"By the year 2014-15, the fiscal benefit of the price increase will consist of a first order reduction in expenditure on subsidies, and a second order effect from the enhanced profits of upstream oil marketing companies," the Kelkar Committee stated noting that subsidy on diesel had been a major contributor to fiscal slippage in recent years.

The ministry has also proposed to reduce one-third subsidy on kerosene by 2014-15 and on cooking gas by a quarter in this year, government officials said.

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The proposals will substantially reduce government's subsidy burden on diesel, kerosene and liquefied petroleum gas (LPG), officials said. The estimated fuel subsidy for 2012-13 is about Rs 166,000 crore, out of which the finance ministry has sanctioned Rs 30,000 crore and released the first installment of Rs 10,000 crore to state oil marketing firms this week.

Government officials have confirmed the oil ministry has sent the two proposals to the Cabinet Secretariat after deliberating the matters with other departments, including the finance ministry.

"Raising diesel, kerosene and LPG prices in a calibrated manner is part of the government's plan for fiscal consolidation and based on the Kelkar committee report. Final decision will depend on political will," a senior government official said on condition of anonymity. The committee, mandated by the finance minister to outline a road map for fiscal consolidation in the medium term, suggested eliminating half of subsidy on diesel by March 31, and the remaining half over the next fiscal year.

The intent of the government to implement the Kelkar committee recommendations was spelled out by Oil Secretary GC Chaturvedi last week on the sidelines of the National Development Council meeting. Decisions on fuel pricing and deregulation of diesel is expected to be taken by the cabinet committee on economic affairs (CCEA) while cabinet committee on political affairs (CCPA) may take a call on raising cap on the supply of subsidised cooking gas, officials said.

Oil Minister Veerappa Moily had earlier said that the government was considering raising LPG cap from six to nine per annum after consumers, particularly the poor, complained that six in a year was not adequate. "The oil ministry has not made any specific recommendations, but it has given several options and left the decision on the cabinet," the official quoted earlier said.

Officials said raising fuel price and eliminating subsidy on diesel is a must to check rising fiscal deficit and save financial health of state oil firms - Indian OilBSE 3.82 %, Bharat PetroleumBSE 1.77 % and Hindustan PetroleumBSE 5.57 %. The oil ministry is seeking more than Rs 100,000 crore from the finance ministry to compensate the three oil firms for selling fuel below market rates in the current fiscal year. State-run upstream companies such as ONGCBSE 1.79 % and Oil IndiaBSE 2.21 % are expected to shoulder about Rs 55,000-crore subsidy burden this year. The marketing firms would absorb the balance, officials said.

The Kelkar committee has also cautioned the government against the deteriorating financial health of state oil marketing companies (OMCs). "If the OMCs are not adequately funded against their under-recoveries, there is a genuine risk that is analogous to the case of the state electricity boards - the high debt of the OMCs could lead them into financial crisis. This in turn, could not only cause an oil supply breakdown resulting in immense public hardship but also adversely impact the banking system from where such debt is sourced," the Kelkar report said.

Social sector representatives today pitched for tax exemptions and greater involvement of NGOs in implementation of welfare programmes of the government.

These demands were raised by them during the customary pre-budget meeting with Finance Minister P Chidambaram here. The Union Budget is likely to be presented on February 28.

The representatives also suggested that government engages highly qualified professionals at grass root level, exempt donation to non-profitable organisation and recognising profit making NGOs for bank loans and financing.

They also suggested linking of inland water ways programme with MNREGA, higher allocation for rehabilitation of disabled people and early disbursement of grants to NGOs.

In his introductory remarks, Chidambaram said that higher growth would increase the capacity of the government to undertake social-welfare programmes for different sections of the society.

He said the country has been able to come out of the difficult economic phase in 2012 and efforts will be made to restore the economy on high growth path.

Worsening global economy, the Minister said has impacted exports and inflation making it difficult for the government to restore fiscal health of the country.

Chidambaram expressed the hope that some good results would be seen in the economy by the end of current fiscal.

The social sector groups also demanded that charitable institutions should be exempted from service tax, more funds for alleviating urban poverty, formulation and adoption of National Competition Policy.

They also pitched for higher investment in education, gender equality and for providing water and sanitation facilities.

Social sector representatives who were present at the meeting included D R Mehta of Jaipur Foot, Namrata Bali ( SEWA Academy), Rukmani Banerjeee (Pratham) and Samit Aich ( Greenpeace).