The Oil Ministry has moved a Cabinet note seeking immediate hike in diesel,cooking gas and kerosene prices and limiting supply of subsidised LPG cylinders to 4-6 per household in a year.
The ministry’s proposal to the Cabinet Committee on Political Affairs (CCPA) also includes barring households with income of more than Rs 50,000 per month or Rs 6 lakh in a year from getting subsidised LPG cylinders.
The Cabinet committee is likely to consider the hike at the first occasion it meets after the current monsoon session of Parliament ends on Friday,a top Oil Ministry official said on Wednesday.
Also on cards is an increase in petrol price on which the state-owned oil firms,despite having freedom to raise rates,are losing close to Rs 6 per litre.
The price hike may take place any time after Friday. “The situation facing us is very grim. We can no longer afford to postpone a price hike,” the official said.
“We have not recommended the quantum of increase in rates but have analysed the situation that warrants an immediate price rise,” he added.
Diesel,domestic LPG and PDS kerosene rates have not been changed since June 2011 even though cost of production has soared 28 per cent.
Oil PSUs are losing Rs 560 crore per day on sale of diesel and cooking fuel at present,and are forced to resort to short-term borrowings to meet funds needed for importing crude oil (raw material for making fuel).
Borrowings of the three state fuel retailers,who in the first quarter reported biggest net losses in Indian corporate history,shot up to Rs 157,617 crore at end of June from Rs 128,272 crore as on March 31.
“The situation is very grim. Oil companies can borrow money only to a certain extent. Soon there might a situation where they don’t have money to buy crude oil and then we will face supply shortfalls,” the official said.
He said all political parties in private agree on the necessity of raising fuel prices but criticise such a decision in public. “This is dishonest politics”.
Diesel is being sold at a loss of Rs 19.26 a litre,kerosene at Rs 34.34 per litre and domestic LPG at Rs 347 per 14.2-kg cylinder. At current rate,the three firms are projected to lose Rs 1,92,951 crore in revenues in the financial year ending March 31,2012.
As per the Oil Ministry’s proposal,every household would get only 4-6 LPG cylinders at subsidised price of Rs 399 in Delhi and they will have to pay market price of Rs 746 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 Rs 14.78 per litre excise duty currently levied on petrol.
Indian Oil Corp (IOC),Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) reported a combined revenue loss of Rs 47,811 crore on fuel sales in the first quarter. Of this,upstream firms like ONGC made good Rs 15,061 crore by the way of discount of crude oil they sell to them.
The oil ministry sought cash subsidy for the remaining Rs 32,750 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 Rs 22,451 crore. HPCL posted Rs 9,249 crore net loss in April-June,while BPCL reported a net loss of Rs 8,836 crore.
Oil firms would most likely post net losses even in the second quarter as the logjam in Parliament over coal block 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.