Union petroleum and natural gas minister Murli Deora on Wednesday said that his ministry was not in favour of raising diesel and cooking gas prices. A spurt in global prices of crude oil had set off speculation of an imminent fuel price hike, but the minister said such a hike will only add to the already high inflation rate.
“We are trying to see that we do not have to increase prices,” he told reporters. Last week, a meeting of the empowered group of ministers (EGoM) headed by finance minister Pranab Mukherjee was indefinitely postponed on Deora’s insistence that fuel prices not be raised just now. “I don’t think the EGoM should meet just now to decide on raising prices,” Deora said.
Others in the government have favoured raising fuel prices as a response to hardening of international crude oil rates to over $90 per barrel (R4,077) while Deora said he preferred the subsidy route for reducing the burden on the common man.
Diesel has a weightage of 4.67% in calculating the inflation rate, while LPG contributes 0.91%. A hike now would further accelerate inflation, which was last calculated at 7.48%.
Deora said he wants the government to make up for at least half of the R72,812 crore revenue loss that state-owned oil firms are likely to incur this fiscal by selling diesel, LPG and kerosene below cost. Deora said the government would do everything possible to protect the balance sheets of state-owned oil firms and insulate the common man from the vagaries of the oil market.
“In 2008, when crude oil shot up to $147 per barrel, we insulated the common man and provided for R103,000 crore from the budget to subsidise fuel costs,” he said.
The EGoM was to meet to consider at least a R2-per-litre hike in the diesel price and R30-40 per cylinder for LPG. The under-recovery (or the revenue oil companies lose) on diesel today stands at R6.99 per litre, sources said. Besides diesel, the oil firms lose R19.60 per litre on PDS kerosene sales and R366.28 per 14.2-kg LPG cylinder.
The oil firms had last month raised petrol price by R2.94-2.96 a litre but this was short of the R3.5 per litre sought to bring retail prices at import-parity. The government had in June this year freed petrol prices, but the state firms continue to informally consult the oil ministry before revising prices.