Petrol, diesel, LPG price hike on the cards

PTI

New Delhi, 07 June 2010: A ministerial panel may on Monday decide on raising petrol and diesel prices by up to Rs 3.50 a litre and domestic LPG rates by Rs 25-50 per cylinder, besides considering raising kerosene prices marginally.

The Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, will meet on Monday afternoon to consider a Kirit Parikh Committee report that calls for freeing of petrol and diesel prices from government control, besides a steep hike in LPG and kerosene rates to cut the subsidy bill.

"Selling fuel at rates below their imported cost is unsustainable. If prices are not hiked, the government will have to find ways to make up for the Rs 72,300 crore deficit arising from selling petrol, diesel, domestic LPG and kerosene below their imported cost," an Oil Ministry official said.

In all probability, decontrol of petrol prices looks certain, and if done, the rates would go up by Rs 3.35 per litre, which being the difference between the retail price and imported cost. Mukherjee may even push for freeing pricing of diesel - the nation’s most consumed fuel that is used in transport sector and hence has inflationary impact.

"It (diesel price decontrol) will depend a lot on allies like (Railway Minister and TMC head) Mamata Banerjee. If she agrees, the diesel pricing will also be freed," he said.

Also on cards is a Rs 50 per cylinder hike in domestic LPG prices, which may be moderated if Banerjee and other allies in the ruling UPA insist.

A marginal increase in politically sensitive kerosene, which is used by the masses for lighting and cooking purposes, may also be proposed at the EGoM and the jury is still out on its acceptance by the constituent ministers, the official said.

The EGoM will have to raise the price of petrol by Rs 3.35 per litre and that of diesel by Rs 3.49 a litre to free them from government control.

Petrol in Delhi currently costs Rs 47.93 a litre, while diesel is priced at Rs 38.10 a litre.

Decontrol of auto fuel prices has become easier for the government after international crude oil prices fell over US$10 to quote at USD 72-74 a barrel.

"The hike needed to free auto fuel prices till last week was Rs 6.07 a litre in petrol and Rs 6.38 a litre in diesel.

Raising prices, particularly that of diesel by such an amount in one go, was considered politically difficult. But now the hike needed is pretty reasonable (as crude oil has become cheaper)," he said.

State-owned Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum currently lose Rs 203 crore per day on selling fuel below imported cost.

They currently sell petrol at a loss of Rs 3.35 a litre, while that for diesel is Rs 3.49, Rs 18.82 for PDS kerosene and Rs 261.90 for every 14.2-kg LPG cylinder.