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Brace yourself for small diesel price increases

The government is likely to increase fuel prices in small doses - a necessary move in the wake of the sudden surge in global crude oil prices along with a sharp depreciation of the rupee against the US dollar. Anupama Airy reports.

business Updated: Sep 25, 2013 03:05 IST
Anupama Airy

You may not have to bear the burden of high fuel price hikes this festive season.

The government is likely to increase fuel prices in small doses - a necessary move in the wake of the sudden surge in global crude oil prices along with a sharp depreciation of the rupee against the US dollar - so that your household budgets do not get majorly affected.

The Central government is considering a new proposal to increase diesel prices by 90 paise a month or 50 paise every 15 days along with a Rs 10 per cylinder increase in cooking gas prices. A small monthly hike in prices of kerosene sold through ration shops is also under consideration.

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HT is in possession of an internal note of the petroleum ministry that talks about these combo fuel price hike options from October 1, 2013.

However, when asked to comment on a possible price hike, petroleum minister Veerappa Moily avoided any specific answers. "We (the government) are concerned about the losses of oil firms on fuel sales... if you ask me today, there is no proposal. But we live in a dynamic environment," he said.

At present, diesel prices are increased by 50 paise every month (excluding local taxes) while petrol prices are revised every fortnight (or 15 days) by state-owned oil companies - Indian Oil, Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL).

With elections in five states - Delhi, Rajasthan, Madhya Pradesh, Chhattisgarh and Mizoram (poll schedule to be announced soon by the Election Commission) - Congress leaders and party workers also fears a huge political fallout arising out of any steep or one-time hike in fuel prices, government sources said.

Keeping this in mind, the Congress-led UPA government is keen to instead follow the model of increasing fuel prices in small quantum through the monthly and fortnightly price hikes.

At present, oil companies are losing Rs 14.50 a litre on diesel, Rs 36.83 per litre on kerosene and Rs 470.38 per 14.2 kg on cooking gas (or LPG).

However, with softening of global prices along with a stabilising rupee, losses are also expected to come down substantially.

This trend along with the proposed small doses of fuel price hikes together is expected to bring down the government's fuel subsidy outgo to less than Rs 50,000 crore from Rs 97,500 crore and help in containing the widening fiscal and current account deficits that led to a 20% fall in the rupee's value against the dollar.

While the measures like the monthly 50-paise-per-litre hike in diesel prices and capping of subsidised LPG cylinders were expected to bring down fuel subsidies considerably this year, the sharp fall in rupee and high global oil prices led to fuel losses climb up substantially.