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Bulk diesel buyers ask government to help minimize impact of subsidy loss

Bulk diesel purchasers in India who have been affected by the petroleum ministry’s January 15 decision to abolish their subsidy are urging the government to provide them some assistance. The decision has also affected the Maharashtra State Road Transport Corp. (MSRTC) and Pune Mahanagar Parivahan Mahamandal Ltd. (PMPML).
“Our condition is critical. We currently purchase diesel worth Rs 1.40 crore (US$258,000) per day, Rs 42 crore (US$7.7 million) per month and Rs 506 crore (US$93 million) per year. If the subsidy stops like this, our finances will collapse,” MSRTC Chairman Jeevanrao Gore told reporters. “Though the transport utilities say there will be no immediate fare hike, they say decisions will have to be taken if the state government does not step in with help.” He added, “If we increase fares, we will lose passengers. We have to compete with private players, so we keep our fares low.” MSRTC has sent a request to the state government to provide some subsidy, similar to that given by the Kerala government.
PMPML Chairman and Managing Director Ramchandra Joshi said, “We are trying to find an alternative. Currently, there is a 21% value added tax (VAT) on diesel, so we have demanded that the state government cancel it completely or take it to 10%. Also, other taxes like passengers’ tax and nutrition tax should be cancelled. We are not planning to increase our fares, but till mid-February some decisions will have to be taken.” PMPML currently needs 76,000 liters of diesel fuel per day, which costs around Rs 8 lakh (US$14,700), taking its yearly budget to Rs 32 crore (US$5.9 million).
Vivek Velankar, president of the city-based civil society group, Sajag Nagrik Manch (SNM), said, “We are afraid there will be a fare hike in the near future. We have also written to the chief minister and state finance minister to cancel VAT for public transport bodies, as it will ultimately affect the commuters.”
The finance ministry had informed the petroleum ministry early in February that it plans to remove the 2.5% import tax on petrol and diesel fuel to save close to Rs 9,000 crore (US$1.7 billion)) in subsidy bills. (January 31, 2013)