Diesel, domestic LPG and kerosene rates, have not been revised since June last year and under current circumstances it does not look feasible for the UPA government to increase prices
New Delhi: Diesel and cooking gas (liquefied petroleum gas or LPG) prices are unlikely to be hiked even after the end of the Monsoon Session of Parliament next week as the government is wary of taking such a decision at a time when it already has political battles on hand, reports PTI.
Diesel, domestic LPG and kerosene rates, which have not been revised since June last year, were expected to be raised after the Parliament session ends on 7th September.
"It is extremely difficult under present circumstances to raise fuel prices," a top government source said here. "I am not saying that it is impossible but it certainly does not look feasible at this moment of time".
Even a hike in prices of petrol, a fuel which was freed from government control in June 2010, would be "difficult," he said.
State-run oil marketing companies are losing Rs3.85 per litre on sale of petrol as global oil prices have firmed up since the last revision in July. Petrol price were last hiked by Rs0.70 a litre on 24th July. It currently costs Rs68.46 per litre in Delhi and OMCs were hoping to be able to raise rates once Parliament session ends next week.
The government has been in fire-fighting mode since the time Comptroller and Auditor General (CAG) in a report stated that undue benefit of about Rs1.86 lakh crore was extended to private firms by allocating coal blocks for free since 2004.
The source said while state-owned oil firms are empowered to revise petrol prices, a decision on diesel, domestic LPG and kerosene rates has to be taken by the Cabinet Committee on Political Affairs (CCPA).
Oil companies are losing Rs450 crore per day on selling diesel at prices that are Rs15.55 a litre lower than its cost, kerosene at a discount of Rs29.97 a litre and under selling of Rs231 per 14.2-kg LPG cylinder.
Oil Minister S Jaipal Reddy hinted of Government's desire to make up for the losses incurred by OMCs instead of raising prices when he told Lok Sabha in a written reply that he has sought reduction in excise duty on petrol.
"In order to offset the under-recovery (loss) on petrol, Ministry of Petroleum and Natural Gas has taken up the matter with the Ministry of Finance for bringing down the incidence of excise duty," he said.
The government levies Rs14.78 a litre excise duty on petrol and it can be lowered in proportion to the losses oil firms incur currently.
"In order to mitigate losses on sale of petrol, oil marketing companies had, inter alia, suggested to the government to either declare petrol as a 'regulated' product temporarily and provide cash compensation for the under- recovery or reduce the excise duty on petrol from Rs14.78 per litre by an amount equivalent to the under-recovery on petrol," he said.
Not raising prices would mean the government will have to shell out a massive cash subsidy this fiscal to make up losses incurred by state-owned oil firms on sale of diesel, domestic LPG and kerosene. At current rate, the three PSU firms may end the fiscal with a record revenue loss of Rs167 lakh crore.
Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp lost Rs47,811 crore on sale of the three controlled products during the April-June quarter. Of this, about Rs15,000 crore was made good by upstream firms. The remaining was to be compensated by the government by way of cash subsidy but that hasn't come so far.
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 Rs8,836 crore.
During 2011-12, the three oil marketing companies lost Rs1.38 lakh crore in revenue on selling diesel, LPG and kerosene at government controlled rates. To make up, the Government gave Rs83,500 crore in cash assistance, while upstream firms like Oil and Natural Gas Corp chipped in Rs55,000 crore.
This fiscal, the government may have to give a record Rs1 lakh crore in cash subsidy, sources said.