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Will govt slip on hiking diesel prices?

delhi Updated: Aug 28, 2013 23:32 IST
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Petrol price could see a sharp increase of Rs 2-3 a litre by the end of this week but will the government bite the bullet and take a call on increasing diesel prices by a similar amount?

With a free fall in the value of Indian rupee against the US dollar coupled with a steep upside in global oil and petroleum product prices, losses of state-owned oil companies on domestic diesel sales have mounted to Rs 11 a litre from Rs 3 a litre in May this year.

Oil companies have asked the government for a one-time hike of at least Rs 3-4 a litre in diesel prices over the regular mothly hikes of 50 paise a litre.

On its part, the government continues to officially deny any plan to increase diesel prices sharply. HT spoke to top officials in the petroleum and finance ministries and both stated on record that they were no plans to increase diesel price.

Petroleum minister Veerappa Moily admits that the situation is worrisome but said, “I am yet to apply my mind on the diesel price issue.”

Economic secretary Arvind Mayaram too ruled out any immediate and steep increase in diesel prices stating that any steep hike will only trigger inflation (as food and essential commodity would prices go up) levels.

Mayaram said the hike in diesel prices should continue to be implemented in small doses to beat inflationary pressures.

“The period of price correction of course would get extended in the wake of the steady devaluation of the rupee,” he added.

“We believe that fuel price correction must be done in a calibrated manner so that there are no inflationary pressures and we would continue to do it in the manner that we have been doing so far.”

However, some officials within petroleum ministry said the hike in diesel prices cannot be held back and the government may do it after the monsoon session of the Parliament ends. Senior officials in the Prime Minister’s Office (PMO) and planning commission also stated that a call on increasing diesel and cooking gas prices failing will have to be taken without which the survival of the state-owned oil marketing companies was at stake.

“It’s just a matter of time and tough calls will have to be taken,” the PMO official said.

Besides losses on diesel, oil companies are losing Rs 33.54 per litre on kerosene and Rs 412 per 14.2-kg cooking gas (LPG) cylinder. Every one rupee depreciation against the US dollar adds Rs 8,000 crore to the losses of oil companies.