Government may increase petrol price by Rs 2 a litre and diesel by Re one per litre unless excise duty on the two fuels are cut to neutralise the impact of firming international oil rates.
State fuel retailers Indian Oil, Hindustan Petroleum and Bharat Petroleum currently lose Rs 135 crore per day on sale of petrol, diesel, LPG and kerosene and their annual revenue loss for current fiscal is estimated to be at Rs 38,700 crore.
The basket of crude oil India imports has averaged $70.49 per barrel in the second fortnight of June against the May average of $58, sending alarm bells ringing, a Petroleum Ministry official said.
"We have to act to save our PSU," he said. "The burden (of rising global oil prices) has to be shared equally between the companies, the government and consumers."
PSUs lose Rs 2.96 a litre on diesel and Rs 6.08 per litre on petrol. "One-third of this or Rs 2 per litre on petrol and Re 1 on diesel can be passed on to consumers," he said.
The rest of the losses would be covered by issue of government bonds to the retailers and subsidy sharing by upstream firms like ONGC.
"If the Finance Minister Pranab Mukhejree cuts excise duty on the two fuels, consumers can be spared from price hike," he said. Petrol attracts an excise duty of Rs 11.35 per litre and diesel Rs 1.60 a litre. Besides Rs 2 a litre road cess is levied on the two fuels.