Prime Minister's Economic Advisory Council on Wednesday indicated the need for further hike in the prices of petrol, diesel and cooking gas, in line with the high crude oil prices in the international market.
"Sooner or later at some particular point of time they (government) will have to see that fuel prices get reflected in the retail prices too," said the outgoing chairman of the PM EAC Rangarajan in New Delhi.
The Economic Outlook for 2008-09 released by Rangarajan, too, stressed that "a large backlog of fuel price adjustments...Need to be urgently completed for preserving fiscal order and transmitting the right signals to dampen the demand for automotive fuels".
The government had earlier on June 5 marginally increased the prices of diesel and petrol by Rs three and Rs five per litre respectively and cooking gas by Rs 50 per cylinder to help the oil marketing companies (OMCs) withstand the rising cost of crude oil prices in the international market.
Even after the June price hike and duty cuts, fuel retailers Indian Oil, Bharat Petroleum and Hindustan Petroleum are projected to lose Rs 205,740 crore in revenues this fiscal. They are currently selling petrol at a loss of Rs 11.60 a litre, diesel at Rs 23.23 per litre, kerosene at Rs 39.55 per litre and 14.2-kg LPG cylinder at Rs 348.89.
Expressing concern over the under-recoveries by the OMCs, the council said with oil prices ruling at USD 130 a barrel; the central government may have to issue oil bonds equivalent to 2.2 per cent of the GDP.
However, to the comfort of the government the crude oil prices in the international market has recently declined to USD 112 a barrel.
As per the PMEAC estimates, the off-budget liabilities of the government, after taking into account expenditure towards Sixth Pay Commission awards, farm loan waiver scheme, rural employment guarantee scheme etc, could go up to five per cent of the GDP.