An increase in diesel,cooking gas and kerosene price is “unavoidable”,Oil Minister S Jaipal Reddy said today but indicated that the hike may not be decided by the Cabinet Committee on Political Affairs (CCPA) at its meeting later in the evening.
“There is a meeting of the CCPA (this evening). This item (increase in diesel and cooking fuel) is not listed,” he said after meeting Finance Minister P Chidambaram here. “I am not sure if the item will be taken up at all today.”
Reddy said he had yesterday circulated an updated version of a note detailing the crisis created by rise in crude oil prices and fall in value of rupee against the US dollar to members of the CCPA,which is headed by Prime Minister Manmohan Singh.
“I have tried to acquaint the members of CCPA about this matter… As I have said before,painful and difficult decisions on price of oil products will have to be taken.
Increase in price is unavoidable,” he said.
Reddy added that if the CCPA does not discuss the fuel price issue today,it would be taken up at the next meeting of the Cabinet committee which takes decision that have wider political ramifications.
He said a decision on raising prices would have to be taken not just on economic facts but also taking into account the how much the consumers can absorb. “We have to take a balanced view.”
“If (price increase) is taken up today (by CCPA),which is not very likely,some decisions may be taken… if it is not taken up today,decision will be postponed,” he said.
Asked about the quantum of hike in rates that is likely,he said,”I can’t say to what extent (the price would be increased). If I had the powers it would have been done
yesterday,I don’t know if it will be done today or tomorrow”.
On his meeting with Chidambaram,Reddy said he had “routine interactions” on various proposals but declined to elaborate.
“We discussed the figures relating to under-recoveries (revenue loss that oil PSUs incur on selling fuel below cost),” he added.
PSU oil firms are losing a record Rs 560 crore per day on the sale of regulated diesel and cooking fuels,and another Rs 16 crore a day on petrol. If rates are not increased,state- owned oil firms will be saddled with an unprecedented Rs 1.88
crore revenue loss this fiscal.
They are losing about Rs 6 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 the cost.
They sell diesel 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.
While diesel prices have not been revised since June last year,petrol rates were last hiked in July. A decision on raising petrol price will be taken after the CCPA decision on diesel,domestic LPG and kerosene.
Sources said the CCPA has been informed about how the three state-owned fuel retailers are borrowing to make up for the deficit. Their borrowings shot up to Rs 1,57,617 crore at end of June,from Rs 1,28,272 crore as on March 31.
While diesel prices have not been revised since June last year,petrol rates were last hiked in July. A decision on raising petrol price will be taken after the CCPA meeting on diesel,domestic LPG and kerosene.
The ministry,in the note to CCPA,has been informed it about the three state-owned fuel retailers’ borrowings to make up for the deficit. Their borrowings shot up to Rs 1,57,617 crore at end of June,from Rs 1,28,272 crore as on March 31.
It also seeks to limit supply of subsidised LPG cylinders to 4-6 per household in a year. The ministry wants to bar households with income of more than Rs 50,000 per month or Rs 6 lakh in a year from getting subsidised LPG cylinders.
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 Winter Session of Parliament in November/December.