Common minimum hike: Rs 1-2 for fuel, Rs 20 LPG

The government has, in principle, decided to increase prices of petrol by Rs 2 per litre, diesel by Re 1 per litre and cooking gas by Rs 20 per cylinder...

The government has, in principle, decided to increase prices of petrol by Rs 2 per litre, diesel by Re 1 per litre and cooking gas by Rs 20 per cylinder but will try and push for a higher raise at Saturday8217;s Cabinet meeting.

Sources said that Petroleum Minister Murli Deora8217;s proposal before the Cabinet would be an increase of Rs 3 per litre on petrol, Rs 2 on diesel and Rs 50 on a cooking gas cylinder so that in case allies protest 8212; which they are likely to do, the Left has already opposed any hike 8212; the internally approved price will be pushed as a compromise solution.

Sources said that Congress President and UPA chairperson Sonia Gandhi also approved the price hike late evening at a meeting with Prime Minister Manmohan Singh, External Affairs Minister Pranab Mukherjee, Finance Minister P Chidambaram and Deora.

The proposed hike was arrived at by the ministers and the PM this afternoon when considering measures to bail out the cash-strapped state-run oil marketing companies that may lose Rs 225,000 crore during 2008-09 for selling transport and cooking fuels below cost, sources said.

8220;Some things have been agreed at today8217;s meeting, but I cannot say what the Cabinet will decide,8221; Deora said after the meeting with Mukherjee, Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Prime Minister8217;s Principal Secretary T K Nair.

After Deora and Chidambaram locked horns over the issue, the senior ministers opted for the usual three-pronged strategy where Deora would raise prices to fetch OMCs Rs 7,500 crore with Chidambaram contributing equally through a marginal cut in excise and customs duty on crude oil and petroleum products.

The OMCs would be asked to take a hit of Rs 45,000 crore with state-run oil producers chipping in Rs 30,000 crore to reduce the under-recoveries. The government would agree to bear the remaining Rs 90,000 crore as bonds in the hope that losses would pare to Rs 180,000 crore with decline in crude prices.

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In the absence of an internal concurrence, the government decided to postpone a meeting of the Group of Ministers where members from Congress8217;s ally parties would also have been present.

Meanwhile, the Reserve Bank of India made an exception in borrowing norms for the OMCs by allowing banks to lend up to 25 per cent of their exposure in a single sector. The present norm is that banks cannot lend more than 15 per cent in a single sector, with a leeway of 5 per cent more in special circumstances.

The ceiling was raised through a circular amending the Master Circular on Exposure Norms to help Hindustan Petroleum, Bharat Petroleum and Indian Oil, who are left with cash good for only meeting imports for two to three months. End-July, HPCL and BPCL would have exhausted their credit line and ended up without money to fund their business any longer.