Decision on fuel price hike next month

New Delhi, Aug 10: With global crude oil rates refusing to go down, the Government is expected to take a decision next month to hike prices of domestic fuel especially that of petrol and diesel.

The decision will be taken after September 14 once the ongoing monsoon session concludes, Petroleum Ministry officials said.

Currently, public sector oil companies are losing Rs 190 crore per day on sale of petrol, diesel, domestic cooking gas LPG and kerosene.

Last week, Finance Minister P Chidambaram expressed concern over rising international oil price.

Oil firms are losing Rs 5.88 per litre on petrol, Rs 4.80 a litre on diesel, Rs 189.14 per LPG cylinder and Rs 14.63 on sale of every litre of kerosene.

The Government has been reeling under intense pressure to increase the retail prices of petrol, diesel, kerosene and LPG because of huge losses being incurred 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 dollars a barrel.

IndianOil Corporation (IOC) Chairman Sarthak Behuria had said that the company was losing Rs 90 crore every day on the sale of fuel. There is a loss of 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.

UNI