The government is planning to increase the price of petrol by Rs 2 a litre and diesel by Re 1 after the end of the current Monsoon session. With inflation touching a 16-month low of 3.79 per cent, the government is confident of weathering he storm that the decision may raise.
However, given the political sensitivity of cooking fuels LPG and kerosene, the hike could be restricted only to petrol and diesel, sources said.
With the hike, the price of petrol and diesel is expected to touch the February 15 levels when prices were reduced by Rs 2 and Re 1 in view of the stiff opposition by the Left and the Congress.
While reducing the prices of petrol and diesel in mid-February this year, the government had pegged the average crude price at $ 56 per barrel. The average basket of Indian crude oil was at $ 72.94 per barrel on Wednesday.
State-owned oil marketing companies have been losing Rs 185 crore per day by selling petrol, diesel, public distribution system kerosene and liquefied petroleum gas below cost. The issue figured in the last Cabinet Committee on Economic Affairs (CCEA) meeting, where the public issue of upstream oil company Oil India was approved.
The petroleum ministry was asked to prepare a detailed note on the financial health of the public sector oil marketing companies that would enable the cabinet to decide on the quantum of increase and the petroleum products likely to face a price increase.
According to estimates, petrol is being sold at a loss of Rs 2.79 per litre, while diesel is priced at Rs 4.65 a litre below cost. Oil companies suffer a loss of Rs 15.50 on the sale of every litre of kerosene and Rs 178.15 on the sale of every LPG cylinder.
IOC, BPCL and HPCL together stand to lose Rs 52,452 crore in revenues this fiscal if fuel prices are not raised in line with cost. The finance ministry had last week indicated that it would favour issuing oil bonds after an increase in the retail price of petroleum products. The remaining under recoveries will be met through subsidies provided by upstream major Oil and Natural Gas Corporation, GAIL (India) Ltd and Oil India Ltd.