Finance minister Pranab Mukherjee had in his Budget speech yesterday ignored calls for a reduction in customs and excise duty to contain the impact of a spurt in global crude oil prices, which have touched a two-year high of $110 per barrel
New Delhi: Losses on the sale of diesel at government-controlled rates have hit a record Rs12.56 a litre even as state-owned firms look at ways to mitigate a spurt in the cost of raw material (crude oil), reports PTI.
Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) are selling diesel, domestic LPG and kerosene way below cost as the government battles to control inflation.
"Diesel is being sold at a discount of Rs12.56 per litre to its imported cost," an industry official said.
Finance minister Pranab Mukherjee had in his Budget for 2011-12 ignored calls for a reduction in customs and excise duty to contain the impact of a spurt in global crude oil prices, which have touched a two-year high of $110 per barrel.
Oil minister S Jaipal Reddy had last week stated he would take the case for an auto fuel price hike to an Empowered Group of Ministers (EGoM) headed by Mr Mukherjee after the budget.
The retail price of diesel would have to be hiked by Rs12.56 a litre if the government was to implement its June 2010, decision of freeing pricing of the most-consumed fuel from its control.
The three state retailers are together losing over Rs237 crore per day in revenue on the sale of diesel below its imported cost.
"This is the biggest loss they have ever incurred," the official said.
Besides diesel, IOC, BPCL and HPCL are losing Rs24.74 per litre on kerosene and Rs297.80 per 14.2-kg LPG cylinder.
The three firms are losing a total of Rs392 crore in revenue every day on selling diesel, domestic LPG and kerosene below cost.
"For the full fiscal, the three are projected to lose Rs77,645 crore in revenues at current prices," the official said.
In addition, they suffer a loss of about Rs2.50 per litre on petrol sales, even though prices were freed from government control in June last year.
If prices are not hiked, the government will have to come up with other ways to compensate the oil marketing companies for their losses.
The oil ministry wants the finance ministry to compensate the oil companies in cash for at least half of their under-recoveries by making adequate provisions in the budget.
Upstream oil firms like Oil & Natural Gas Corporation (ONGC) will shoulder one-third of the burden.
For the first nine months, the finance ministry has approved the release of a cash compensation of Rs21,000 crore for the three state-run fuel retailers.
With crude oil prices in the international market ruling above $100 a barrel and the crisis worsening in Libya and other Middle East countries, finance minister Pranab Mukherjee said, "We are already confronting (the situation)"
New Delhi: Grappling with a high rate of price rice, the government today expressed concern that increasing prices of crude and other commodities in global markets could add to inflationary pressure in the country, reports PTI.
"The possibility of the global commodity inflation adding to domestic inflationary pressures cannot be ruled out," finance minister Pranab Mukherjee said at the 83rd Annual General Meeting of industry chamber Federation of Indian Chambers of Commerce and Industry (Ficci) here.
Noting that the steady increase of international crude oil and other commodity prices is a reality, the minister said, "We are already confronting (the situation)."
He made these comments a day after presentation of Budget proposals for 2011-12 that seek to raise the economic growth rate to about 9% from 8.6% in the current fiscal.
Crude oil prices in the international market are ruling above $100 a barrel and with the crisis worsening in Libya and other Middle East countries, they may go up further.
Although food inflation declined from 20.2% in February 2010, to 9.3% in January 2011, it still remains a concern for the government.
Headline inflation in January, at 8.23%, is above the comfort level of around 5%-6%.
The challenge before the government and the monetary authority (Reserve Bank of India), Mr Mukherjee said, has been to support the recovery process without compromising stability. "The task has not been easy, but we are making progress," he added.
With a view to control inflation, the RBI has increased key policy rates seven times since March 2010.
The finance minister said there is a need to improve the supply response of agriculture to expanding domestic demand and significantly enhance investment in the sector by the private and public sector.
He further said that as government spending comes down as a part of the fiscal consolidation process, India needs to effect adjustments in the composition of growth on the demand and supply side.
"We have to ensure that the revival in private investment is sustained and goes back close to pre-crisis growth rates.
This requires a stronger fiscal consolidation to enlarge the resource space for private enterprises," he said.
He further said that India's growth story is comforting, but there are several challenges that the economy faces in the external and domestic context.
He said the global recovery is fragile, with advanced economies exhibiting a large fiscal deficit, high public debt and unemployment, and there is a danger of the sovereign crisis in some Euro zone countries spilling over to other financial markets.
Panellists attributed the latest rise in new business to ongoing improvements in market conditions, increased marketing and good quality goods
The seasonally adjusted HSBC Purchasing Managers' Index (PMI)-a headline index to measure the overall health of the manufacturing sector-posted 57.9 in February, up from 56.8 in the previous month. The latest reading indicates a marked expansion of the Indian manufacturing sector, which is the strongest in three months and above the long-run series average (56.1).
The index is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 500 manufacturing companies.
New orders received by manufacturers increased substantially in February. Besides, the rate of growth has been on the uptick for a second month in a row. Panellists attributed the latest rise in new business to ongoing improvements in market conditions, increased marketing and good quality goods. New export orders also grew in February and regained momentum following January's three-month growth low.
However, a further rise in backlogs of work suggested that pressure on production capacity remained. While the extent to which outstanding business accumulated weakened, the period of growth now stretches to eleven months.
Input prices faced by manufacturers in India witnessed a sharp increase in the month under review. Higher raw material prices, particularly for metals, were the main drivers of the latest rise in costs. Output prices also increased, but at a slightly weaker rate than in January.