The oil ministry is wary that if oil firms are allowed to raise just petrol prices on Friday or Saturday, the political opposition to the unpopular decision may force the hands of the Cabinet into not hiking diesel, LPG and kerosene rates
New Delhi: The government may hike petrol, diesel, cooking gas and kerosene prices simultaneously as early as next week with oil minister S Jaipal Reddy saying “difficult and painful” decisions need to be taken, reports PTI.
“There are no immediate proposals to raise prices of various oil products including petrol,” Mr Reddy told reporters.
Though he did not specify when the hike may take place, indications are it could be done after the Cabinet meets next week.
The ministry is wary that if oil firms are allowed to raise just petrol prices on Friday or Saturday, the political opposition to the unpopular decision may force the hands of the Cabinet into not hiking diesel, liquefied petroleum gas (LPG) and kerosene rates.
With oil firms losing a record Rs560 crore per day on sale of regulated diesel and cooking fuels and another Rs 16 a day on petrol, the oil ministry is pushing for raising rates once the Monsoon Session of Parliament ends on Friday.
“We are of course facing treacherous crisis of unpredictable magnitude... Our oil companies will lose huge nearly Rs200,000 crore (if rates are not raised),” Mr Reddy said, adding that steps need to be taken to reduce this deficit. “We have to take some difficult, painful decisions.”
On the political opposition to raising fuel rates, Mr Reddy said fuel pricing was a classic case of “politics defeating economics”.
Mr Reddy said he has moved a note for the consideration of the Cabinet Committee on Political Affairs (CCPA) explaining the precarious situation facing the oil sector. “It is my duty as a minister to bring facts to the notice of CCPA. When will it meet, I have no idea”.
State-owned fuel retailers are losing over Rs5 per litre on sale of petrol, a commodity which was freed from government control in June 2010 but whose rates haven’t moved in tandem with cost.
They sell diesel at a loss of Rs19.26 a litre, kerosene at Rs34.34 per litre and domestic LPG at Rs347 per 14.2-kg cylinder.
“Petrol price increase is necessary. We have to take decision in consultation with other oil companies and the government,” IOC chairman RS Butola said, adding that the company lost Rs950 crore on sale of petrol in the first quarter and has lost another Rs 300 crore since then.
IOC’s borrowings are at around Rs88,000 crore and not far from the ceiling of Rs1,10,000 crore that the company can borrow, he said.
“We have a deficit of Rs5,000 crore to Rs6,000 crore every month. If it is not met, our capability to buy crude oil will be impacted,” he said.
Diesel is being sold at a loss of Rs19.26 a litre, kerosene at Rs34.34 per litre and domestic LPG at Rs347 per 14.2-kg cylinder. At current rate, the three firms are projected to lose Rs1,92,951 crore in revenues in the financial year ending 31 March 2012.
As per the oil ministry’s proposal, every household would get only 4-6 LPG cylinders at subsidised price of Rs399 in Delhi and they will have to pay market price of Rs746 per cylinder for any requirement beyond that.
Besides considering raising diesel, domestic LPG and PDS kerosene rates, the CCPA may also consider a cut in the Rs14.78 per litre excise duty currently levied on petrol.
IOC, Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) reported a combined revenue loss of Rs47,811 crore on fuel sales in the first quarter. Of this, upstream firms like ONGC made good Rs15,061 crore by the way of discount of crude oil they sell to them.
The oil ministry sought cash subsidy for the remaining Rs32,750 crore but the finance ministry has not released any.
In the absence of the subsidy support, IOC reported the highest quarterly net loss by any Indian company at Rs22,451 crore. HPCL posted Rs9,249 crore net loss in April-June, while BPCL reported a net loss of Rs ,836 crore.
Oil firms would most likely post net losses even in the second quarter as the logjam in Parliament over coal blocks allocation has meant that supplementary demands for grants are not approved and no subsidy payout is possible till the next winter session of Parliament in November/ December.