Centre mulling immediate solution to deal with fuel prices: Pradhan

Centre mulling immediate solution to deal with fuel prices: Pradhan

Sources said the windfall tax is one of the options being considered by the government as an institutional solution to dealing with the problem of spike in oil prices. Oil producers get paid global rates for the oil they produce from domestic fields.

The rise in fuel prices is drawing sharp criticism from the Opposition with agitations in many parts of the country being launched by the Congress.

The tax could be used in two ways - as a subsidy to fuel retailers for absorbing the hikes and not passing them on to consumers or compensation to the government if it cuts the excise duty. For relief to consumers, states will also have to cut Value-Added Tax.

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The government will be levying cess on all oil producers - both state-run and private sector - so as not to attract criticism of stifling state-owned explorers.

However, consumers can expect some relief as the Brent crude oil prices fell to around $78 from $80 per barrel on Friday. Petroleum minister will have a meeting with the officials of the oil companies. "The Union Minister is making such statements only to shrug off his responsibility", said Behera. This follows reluctance on part of the finance ministry to cut excise duty as it has to ensure adequate funds are available to social welfare schemes in the election year. Since Indian oil producers sell their crude at worldwide prices, any revenues from oil sales at more than US$70 would be collected by the state and transferred to fuel retailers to cushion the price blow to end consumers.

As fuel prices continue to surge across India for the 10th consecutive day on Wednesday, former Union Finance Minister P. Chidambaram claimed that the rates can be reduced by Rs. 25 per litre, but the government is not doing so. "We have to cut-off our expenditure on other goods for petrol and diesel". But after the NDA government has come to power in May 2014 the prices of petrol and diesel have taken an ascending course, never coming down.

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