Government likely to raise fuel prices

New Delhi, Aug 5: The government is under intense pressure to increase the retail prices of petrol, diesel, kerosene and LPG as the oil marketing companies are reeling under huge losses by selling their products below the international prices.

There seems to be no respite for the oil companies in the near future with the average price of Brent crude crossing 77 dollar a barrel.

Last week, Indian Oil Corporation (IOC) Chairman Sarthak Behuria while announcing the company's quarter results had said it was losing Rs 90 crore every day on the sale of fuel. It is losing Rs 5.88 per litre on petrol and Rs 4.80 on diesel.

The under-recovery for kerosene is around Rs 14.63 a litre and for cooking gas Rs 189.14 per cylinder.

The company suffered a net under realisation of Rs 4,879 crore on the sale of petroleum products during the first quarter.

Sources said the petroleum ministry has approached the Cabinet Committee of Economic Affairs (CCEA) seeking its approval for increase in the prices of petrol, diesel, kerosene and LPG.

Based on the average price in the first week of June, petrol in Delhi is being sold at Rs 5.03 per litre below the desired market price (Rs 43.52 a litre currently), diesel at Rs 3.80 per litre below desired prices (current price is Rs 30.48), kerosene at Rs 14.19 per litre (current price is Rs 9.05) and LPG at Rs 171.97 per cylinder (current price is Rs 294.75).

Currently, the subsidy on the four petroleum products is shared equally by the government (through oil bonds), the upstream oil companies and the marketing companies.

The petroleum ministry has also requested the finance ministry to approve oil bonds worth around Rs 19,000 crore for the financial year to recover oil PSUs from the losses.

The government is also considering a three-pronged strategy to end the practice of issuing of oil bonds to PSU oil marketing companies to offset part of the losses suffered on account of sale of fuel at lower-than-market prices.

The move to end bond issues follows recognition that the long-term mismatch between domestic retail prices and global oil prices is unsustainable without government intervention.

As per the proposed strategy, government will effect a price hike in four products, meet its burden by current provisioning without recourse to oil bonds, and modify the existing LPG and kerosene subsidy scheme to clearly target the poor.

Taking a cue from the Rangarajan panel report, it is proposed to shift to a specific levy and revise the levies at five rupees a litre for diesel and Rs 14.75 per litre for petrol from the present mix of specific and ad-valorem duties.

UNI