Taking into consideration the increasing losses of oil firms, the Empowered Group of Ministers (EGoM) that is headed by Finance Minister Pranab Mukherjee had not looked into and reviewed the changing price trends of crude oil that has gone up by upto 50 per cent. The EgoM had not met since Jun 2010.
Reddy met with the PM and explained the humongous loss the state-owned oil firms are incurring due to the sale of diesel, domestic LPG and kerosene at government-controlled prices. The loss is estimated to be in the tune of Rs 450 crore per day. Reddy is also believed to have made the PM aware of the shaky situation of the state-owned oil firms who are under debt since they fail to get the full money for the fuel they produce.
Reddy, however did not give an official statement in this regard and failed to divulge details of the meeting with the PM. Following a meeting with the Finance Minister Pranab Mukherjee last week, Reddy said, "I am concerned about the increasing under-recoveries (revenue losses) of oil marketing companies (OMCs). Everyday, OMCs are incurring under-recoveries of about Rs 450 crore."
The EgoM scheduled to meet on May 11 was later postponed without an intimation on the changed date. The Oil Ministry is pushing for a Rs 3- 4 per litre hike in diesel and a Rs 20-25 per cylinder increase in LPG rates. They are also examining a possible increase in kerosene prices. With a couple of fuel hikes the public had to suffer recently, the most deadly blow coming with the steep Rs 5 per litre hike and another small hike expected around the corner.
With the major players in the market like Indian Oil, Bharat Petroleum and Hindustan Petroleum free from the government control since Jun 2010 and given a free hand in fixing rates. Oil companies are apparently losing Rs 14.22 on the sale of a litre of diesel in the market. The current price of diesel in Delhi is Rs 37.75 per litre.
Also, the state oil firms are loosing close to Rs 27.47 per litre of kerosene and Rs 381.14 per 14.2-kg domestic LPG cylinder. The three major players are expected to have a revenue loss of Rs 160,568 crore by the end of the fiscal. Part of the loss will have to be borne by the government in its budget. The three fuel products had undergone a rate hike in Jun 2010 when crude oil was ruling at USD 72 per barrel. India's acquiring of crude oil averaged at USD 110 a barrel this month.