EGoM should decide on diesel price deregulation: Official | business | Hindustan Times
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EGoM should decide on diesel price deregulation: Official

business Updated: Dec 06, 2010 16:04 IST

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An Empowered Group of Ministers headed by Finance Minister Pranab Mukherjee will have to take a call on making prices of diesel fully market-determined, Oil Secretary S Sundareshan said on Monday.

"That call (to free diesel prices from government control) will have to be taken by EGoM," he told reporters.

State-run Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum currently sell diesel at Rs 4.71 per litre discount to its imported cost.

If diesel rates are deregulated that is the amount by which retail prices will go up.

The EGoM had on June 25 freed petrol price and had decided to make diesel prices market-determined in due course.

"Unfortunately, crude prices have been consistently going up since June," Sundareshan said.

Asked if the EGoM meet has been scheduled to discuss diesel price deregulation, he said: "That's not what I said. All I said was that a call for the issue will have to be taken by the EGoM."

"We are not going to EGoM now," he said. "I think it is extremely difficult for the government to pass on the entire burden (of moving to free price regime) to the consumers."

"We were (in June this year) hoping crude prices would soften and there would be reasonable grounds for passing on a small additional burden to the consumer," Sundareshan said.

International crude oil (raw material for making petrol and diesel) prices have risen by over USD 10 per barrel to over USD 85-86 a barrel since the June decision.

Sundareshan said the deregulation of diesel price will not hit the follow-on public offer (FPO) of IOC slated for January 2011.

"I dont think these issues are related. Reforms are ongoing process... one should remember that IOC's initial public offering (IPO) happened when petrol and diesel prices were completely regulated (by the government)," he said.

The government plans to sell 10 per cent of its stake in IOC in a FPO slated for 3rd or 4th week of January to raise about Rs 8,000-9,000 crore.

Alongside, the company also plans to sell an equal number of shares in the public offer to raise resources for its expansion plans.

The June 26 decision had resulted in a Rs 3.50 a litre hike in petrol prices in Delhi.

At that time, the government decided to raise the diesel price by an ad-hoc Rs 2 per litre, even though the difference between the domestic retail price and imported cost of the fuel was almost twice that.

Since then, diesel rates have not been changed, while the price of petrol has changed five times since then.

For the full fiscal, the three fuel retailers are projected to lose Rs 65,839 crore in revenues on selling fuel below imported cost.