"With imports accounting for about 80 per cent of our crude supplies, the spiralling prices of crude in the international market have put a severe strain on our import bill," he said formally opening a USD 4 billion refinery here.
State-owned oil companies haven't raised diesel, domestic LPG and kerosene for almost a year despite cost of raw material rising by a quarter.
"We also need to rationalise prices and at the same time ensure that the poor and needy are shielded from the effects of such a rationalisation," he said.
The government had in June 2010 freed petrol prices from its control but PSU oil companies haven't been able to raise prices because of political pressure. Petrol price of Rs 65.64 a litre in Delhi is about Rs 9 short of its cost.
The government controls rates of diesel, domestic LPG and kerosene. Oil companies sell diesel at a discount of Rs 16.16 a litre, while they lose Rs 32.59 on sale of every litre of kerosene. A 14.2-kg domestic LPG cylinder costs Rs 570.50 less than its actual cost.
"In order to insulate the common man from the impact of rising oil prices, the Government shoulders a sizeable portion of the burden by pricing diesel, Kerosene and domestic LPG below their market prices," he said.
Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum lost about Rs 138,800 crore in revenues on selling diesel, domestic LPG and kerosene below cost in 2011-12. This fiscal, the revenue loss is estimated at Rs 208,000 crore.
"The challenges we face on the energy front are formidable. We needs adequate supplies of energy at affordable prices. Domestic sources of crude oil and gas are inadequate to meet the growing demands of our rapidly expanding economy," Singh said.