SME Times - Freeing Fuel Prices After Par Session: Government, Fuel Prices Reduces, Freeing Fuel Prices in India, Fuel Prices Reduces in India

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SME Times News Bureau | 04 May, 2010
A discount of Rs 6.63 a litre and diesel at a deficit of Rs 6.25 per litre, is likely to be waved off after the current Parliament session, an Oil Ministry official said in New Delhi on Monday.

According to the official, an Empowered Group of Ministers (EGoM) on fuel pricing is likely to meet after the current Parliament session to discuss freeing petrol, diesel and cooking fuel prices from govt control.

Industry sources said the EGoM may decide to free just the petrol price for now and approve marginal increase in diesel and LPG rates, they said.

The Parliament session is slated to end on 7th May.

In the event of this happening, petrol and diesel prices would have to be raised by over Rs 6 a litre each to bridge the current sale price with the cost price, the sources said.

The EGoM is headed by Finance Minister Pranab Mukherjee. State-owned retailers were projected to lose Rs 90,150 crore this fiscal on selling petrol, diesel, domestic LPG and kerosene below imported cost.

"We are 75 per cent dependent on imported crude oil to meet our requirement. International rates have been firming since March. We need to decide quickly as to how to tackle with this situation," an Oil Ministry official said.

The EGoM also has as its members TMC leader and Railway Minister Mamata Banerjee, Fertilizer Minister M K Alagiri (from DMK) and Agriculture Minister Sharad Pawar -- an apparent attempt by the ruling Congress to get key allies on board.

Industry sources said the task for EGoM, whose decisions are not required to go to the Cabinet for approval, may have become difficult because of presence of leaders like Banerjee who may oppose a steep hike in diesel rates.

Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum lose Rs 272.5 crore per day on selling fuel below cost and may end the fiscal with a Rs 90,150 crore revenue loss.

They currently sell petrol at a loss of Rs 6.63 a litre while the loss is Rs 6.25 per litre on diesel, Rs 19.74 per litre on PDS kerosene and Rs 254.37 per 14.2-kg LPG cylinder.

The official said the three fuel retailers lost Rs 47,960 crore on selling fuel below cost in the 2009-10 fiscal.

For 2009-10, losses on petrol and diesel are to be met by upstream firms like ONGC and the government was supposed to shoulder the under-recovery on cooking fuel. However, the government has not kept its part of the deal.

Of the Rs 29,353 crore revenue loss in the April-December period, upstream firms contributed Rs 8,364 crore to cover for the entire shortfall on petrol and diesel.

But in the case of the Rs 20,989 crore loss on LPG and kerosene in the first nine months, the finance ministry has provided only Rs 12,000 crore.

Besides the Rs 8,989 crore uncovered amount in the April-December period, about Rs 10,000 crore of revenue loss on LPG and kerosene in the January-March quarter remains uncovered.