UPA bites one bullet,lets firms hike petrol by 10%

Despite the 24-hour window,Reddy did not respond to IOC’s warning,thereby indicating the government’s tacit approval to let OMCs independently administer the price of petrol,which was decontrolled in June 2010. Rates were last increased in November 2011,only to be rolled back within a fortnight,ahead of polls in five states.

Yesterday,Reddy had said that it was “very essential” to raise fuel prices as OMCs had incurred losses of Rs 72,000 crore with the rupee landsliding to Rs 56 to a dollar. “It is very essential but (before hiking rates) we have to talk to political parties,” he told reporters in Amritsar,on way to Ashgabat.

IOC’s letter sent early last week to Petroleum Secretary G C Chaturvedi said that the OMCs had lost Rs 1,187 crore on petrol in April and May (as on May 16),and that it feared that the under-recovery would not be reimbursed,as in the January-March quarter when the industry lost Rs 4,651 crore but was denied a refund by the Finance Ministry.

As on date,the industry lost Rs 2,330 crore,said the IOC press release. “This (price increase) excludes losses already suffered till date during current financial year 2012-13,which would require an additional increase of around Rs 1.50 per litre in selling price of petrol for balance part of the year,” it said.

The letter from IOC chairman R S Butola to Chaturvedi asked the Ministry to take back the deregulation on petrol and put it under the administered pricing regime as in the case of diesel,LPG,kerosene,whose under-recoveries were fully reimbursed in the last fiscal year.

According to IOC sources,the price hike was done today to avoid political uproar during the Parliament session that ended on Tuesday. They said the price hike was done as the OMCs were unsure when the government would take a call on raising the prices of diesel,LPG and kerosene which were last increased last June.

Significantly,the Ministry wrote to the Cabinet Secretariat earlier this month seeking a date for convening a meeting of the Empowered Group of Ministers (EGoM),which decides the pricing of controlled products,but it has not heard so far on a probable date.

The current under-recovery on diesel is Rs 13.64 a litre,on kerosene Rs 31.41 a litre and on cooking gas LPG Rs 479 per cylinder. “At these rates,it is estimated that the under-recovery on sale of sensitive products during 2012-13 shall be around Rs 1.86 lakh crore,” said the IOC statement.