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Hike in petrol, diesel and possibly on LPG looks imminent

A hike in petrol and diesel prices and possibly also on LPG looks certain, with the Left leaders agreeing for a marginal increase in prices along with duty cuts to rein in 100 dollars a barrel crude oil price.

business Updated: Jan 13, 2008 16:00 IST

A hike in petrol and diesel prices and possibly also on LPG looks certain, with the Left leaders agreeing for a marginal increase in prices along with duty cuts to rein in 100 dollars a barrel crude oil price.

The toss is between a Rs 4 a litre hike in petrol and Rs 2 per litre increase in diesel prices, and Rs 2 a litre rise in petrol and Re 1 per litre hike in diesel prices, government sources said.

The former option is to come with a 2.5 per cent cut in customs duty on crude oil and petroleum products and a Re one a litre excise duty reduction on petrol and diesel. The latter option, however, is to be coupled with a 5 per cent cut in customs duty on crude oil and petroleum products and a Re one a litre excise duty drop on petrol and diesel.

On domestic LPG, the hike may be in the order of Rs 20 per 14.5-kg cylinder even though the public sector oil firms have been pushing for an increase of Rs 50 per cylinder.

Sources said Petroleum Minister Murli Deora has discussed the issue with key Left leaders including Sitaram Yechury of CPI (M) and Gurudas Dasgupta, who have agreed to a marginal increase in fuel prices.

A Group of Minister headed by External Affairs Minister Pranab Mukherjee will meet on January 17 to discuss the options and make recommendations to the Cabinet.

Indian Oil, Hindustan Petroleum and Bharat Petroleum together are projected to lose Rs 71,808 crore on fuel sale in fiscal 2007-08 if prices and duties are not revised. They currently lose Rs 9.20 per litre on petrol, Rs 11 a litre on diesel, Rs 331 per LPG cylinder and Rs 20 per litre on kerosene.

Sources said ad valorem duty rates on crude oil and petroleum products had resulted in a windfall rise in revenues for the Centre as well as state governments due to the rise in price and quantity imported this year.

A 5 per cent cut in customs duty on crude oil and petroleum products and a Re 1 per litre reduction in excise duty on petrol and diesel would result in Rs 15,530 crore annual reduction in revenues for the central government.

Petrol and diesel prices were last raised in June 2006 when crude oil was at 67 dollars a barrel. It is at 92 dollars per barrel this year. LPG prices was last raised by Rs 20 per cylinder in November 2004 when crude was at 34 dollars a barrel, while kerosene prices have not been changed since 2002 when crude was at 23 dollars per barrel.

Sources said during April-September, oil bonds worth Rs 11,257 crore were issued to the oil companies and Rs 8,788 crore assistance was received from upstream companies like ONGC and GAIL.

A Re one per litre increase in petrol price would give Rs 90 crore a month additional revenue to oil companies. A similar hike in diesel and kerosene would fetch Rs 360 crore a month and Rs 95 crore respectively. An Rs 10 per cylinder increase in LPG prices would result in Rs 58 crore additional revenues every month.