The caretaker government has decided to leave the unpopular but unavoidable decision of increasing oil prices to the next elected government, it has been reliably learnt. The petroleum and the finance ministries had forcefully pleaded to the government last Thursday to allow fortnightly increase of Rs 2 per litre to reduce the growing budget deficit.
Sources said on Tuesday the government which was aware of the adverse impact on the economy of rising oil subsidy to the tune of Rs 14 billion per month, deferred the decision due to its effects on election results. They said the new government will hopefully be installed by February 2008 and the first difficult decision for newcomers would be to increase domestic oil prices and eventually slash oil subsidy.
They said the government has continued freeze on oil prices since January 16, 2007 when oil prices in international market hovered between $56 and $60 per barrel. Since then, the world prices have gone up by 76 percent while diesel and kerosene by 68 percent and 70 percent respectively, they added.
A senior official of the Ministry of Finance said at the current level - $85 and $90 per barrel, our oil import bill would be about $10.5 billion, more than $2 billion estimated in the FY08. He said the outgoing government should have increased oil prices in July - August 2007 to manage budget deficit which now will be around Rs 550 billion this year.