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Fuel dearer if crude crosses $75

Domestic fuels will also share the burden of rising crude prices next time.

india Updated: Jun 08, 2006 01:57 IST

The state-owned oil marketing companies have been given a green signal to revise petrol and diesel prices if the global crude oil prices cross the $75 per barrel mark, a senior official said on Wednesday, even as Monday's steep hike has led to widespread protests.

The domestic fuels, kerosene and cooking gas, will also have to share the burden of rising global crude prices the next time around.

They were spared in this week's price revision when petrol and diesel prices were hiked by Rs 4 and Rs 2 per litre respectively, a senior petroleum ministry official said.

"If the international crude oil price crosses the level of $75 per barrel, the oil companies have been allowed to revise prices of four products (petrol, diesel, kerosene, cooking gas) on periodic basis," the official said.

India depends on imports for over 75 per cent of the domestic fuel demand and is vulnerable to the global volatility in crude prices.

The hike this week has been pegged at global prices of $71 per barrel, the official said.

For a rise of one dollar in global crude oil prices, the retail prices need to be raised by 39 paise per litre of petrol, 30 paise per litre of diesel, 36 paise for a litre of kerosene and 67 paise for a cooking gas cylinder, the official said.

Monday's price revision came after weeks of dilly-dallying, though prices had been last increased in September 2005.

The finance ministry is going to issue oil bonds worth Rs 280 billion to compensate the oil marketing companies for their under-recoveries at the revised retail prices.

The official said the bonds would be issued in four instalments on quarterly basis. The first instalment of Rs 65-70 billion will be issued by the end of this month.

The coupon rate on these bonds will be around 7.5 per cent and they will be of 5-7 years' tenure.