Govt mulls diesel, petrol price hike
BJP asks government not to hike fuel prices
Source: Hueiyen News Service
New Delhi, May 05 2011:
After having freed petrol prices last June, the Government plans to hike diesel rates by up to Rs 3 a litre soon after the Assembly elections in five States are over next week.
This is being done to cushion oil companies, who have been claiming having incurred losses on selling subsidised fuel.
A Rs 3-4 a litre hike in petrol rates is also on the cards.
"An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is scheduled to meet on May 11 to mull hike in diesel prices," a top Government official said.
It is, however, to be seen if a hike can be initiated considering its likely impact on inflation rising further.
With the IMF assuming a baseline average crude oil price of $107 per barrel for 2011 and $108 per barrel for 2012, the Government will have to make a hike in order to help oil companies which have projected over Rs 180,000 crore revenue loss in 2011-12 on selling diesel, domestic LPG and kerosene at current rates.
"Petroleum Ministry officials on Tuesday discussed with the Election Commission the issue of raising prices before Assembly election results are announced on May 13 .
The Election Commission is believed to have cleared the move," the official said.
An increase in domestic LPG prices may also be discussed at the EGoM meeting that will decide on how the oil firms will be compensated for their losses, he said.
Indian Oil, Bharat Petroleum and Hindustan Petroleum are claiming to currently lose Rs 16.17 a litre on diesel and after adding local sales tax or VAT, the 'desired' increase to make rates at par with international prices is Rs 18.19 a litre.
The hike needed to take petrol prices to international parity is about Rs 8.50 per litre, but the entire burden will not be passed on to consumers in one go.
"Oil companies will be asked to stagger the hike over a couple of months," the official said.
Besides petrol and diesel, the oil firms are claiming to lose Rs 29.69 a litre on kerosene and Rs 329.73 per 14.2 kg domestic LPG cylinder.
Indian Oil, Bharat Petroleum and Hindustan Petroleum will "at current international crude oil prices lose Rs 180,208 crore in revenues on selling diesel, domestic LPG and kerosene below their imported cost in the 2011-12 fiscal", the official said.
The revenue loss, termed as under-recovery by oil firms, will be the highest ever, even more than what they lost in 2008-09 when crude touched a record high of US $147 a barrel.
Finance Minister Pranab Mukherjee has refused to cut customs and excise duty on crude this time to protect his projected fiscal deficit.
"The situation in the current fiscal will be worse, the three PSU oil marketing companies are losing Rs 540 crore per day on diesel, domestic LPG and kerosene sales," he said.
With the government expected to take a decision on hiking prices of petroleum products next week, the Bharatiya Janata Party (BJP) on Thursday said any increase in prices of petrol and diesel will be "opportunistic and unjust" .
"People are reeling under price rise, corruption and food inflation.
They will be overburdened by fuel price hike.
It will affect poorer sections severely," BJP leader Mukhtar Abbas Naqvi told media.
An empowered group of ministers (EGoM), headed by union Finance Minister Pranab Mukherjee , is expected to meet May 11 to decide on a hike in diesel prices.
Naqvi said the move to hike prices a day after voting was over in four states and a union territory was "opportunistic" .
The government had decontrolled price of petrol in June last year but had advised companies after the hike in January this year against going for a further increase in prices.
Oil marketing companies have been making demand for hiking prices of petroleum products in view of their mounting under recoveries.
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