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Modest fuel price hike in the offing: Deora

The GoM, set up to resolve the contentious issue, is expected to meet again on Saturday, the Petroleum Minister told reporters, reports Deepak Joshi.

business Updated: Jan 18, 2008 21:28 IST
Deepak Joshi
Deepak Joshi
Hindustan Times

Petrol and diesel prices are set to rise, most likely next week, but Petroleum Minister Murli Deora said on Friday that any hike would be modest.

The Group of Ministers (GoM), set up to resolve the contentious issue, is expected to meet again on Saturday, Deora told reporters. The group had failed to reach a decision at a meeting on Thursday.

"The hike will be (kept) minimal... I can assure that people will not complain," he said.

Prices of petrol and diesel have not been raised since June 6, 2006, but international crude prices have increased sharply in the past six months, hitting the profitability of oil marketing companies.

Deora said Thursday's meeting was inconclusive because two ministers, Railways Minister Lalu Prasad Yadav and Chemicals and Fertiliser Minister Ram Vilas Paswan, were not present.

"I hope the GoM and government will find a solution to the spike in crude oil prices," he said, without elaborating further.

Ministry officials, speaking on condition of anonymity, said the government would order a marginal increase in prices of petrol, diesel and cooking gas, or LPG, while keeping kerosene prices unchanged.

Based on the GoM's recommendation, the Cabinet will likely take a final decision next week, they said.

Government–owned oil marketing companies are currently losing Rs 10.6 per litre on sale of each petrol, Rs 11.6 per litre on diesel, Rs 331.4 per LPG cylinder and Rs 19.89 a litre on kerosene sold through the public distribution system.

The under recoveries are expected to balloon to nearly Rs 71,000 crore in 2007-08. The government has agreed to offset part of the under-recoveries through issue of oil bonds, but that would still leave the oil companies with a combined revenue loss of about Rs 19,000 crore in the current year.

Indian Oil Corporation chairman S Behuria has said the company was currently incurring a daily revenue loss of Rs 174 crore on sale of various petroleum products.

An increase of one rupee a litre in petrol price would cut under-recoveries by Rs 90 crore a month and the same on diesel would slash the loss by Rs 360 crore a month, according to estimates prepared by the Petroleum Ministry.

If the Government increases kerosene prices by the same amount, losses would come down by Rs 95 crore per month and if LPG prices were raised by Rs 10 a cylinder, that would help the retailer recover Rs 58 crore per month.

Further, a reduction in excise duty by Re 1 per litre on petrol and diesel would reduce the under-recoveries of oil companies by Rs 1,380 crore and Rs 5,270 crore respectively.

The petroleum ministry is learnt to have presented several options including a duty cut to the GoM. Currently, petrol and diesel are subjected ad valorem duty of 6 per cent each with a flat excise duty of Rs 13 per litre for petrol and Rs 3.25 per litre in diesel.