No fuel hike for now

Agencies

New Delhi, 07 June 2010: A decision on whether to increase the price of petrol and diesel, expected to lead to political whiplash, has been deferred by the government.

The Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, met on Monday evening to consider whether to deregulate the price of petrol, one of the main recommendations of the Kirit Parikh Committee. The meeting ended with a decision to have another meeting soon on the issue.

In February this year, the committee, headed by economist Kirit Parikh, presented its report to Petroleum Minister Murli Deora. It also suggested raising petrol prices by Rs 6 a litre, and LPG rates by Rs 100 a cylinder. The Parikh report hazarded that the government’s subsidies on fuel are costing it nearly 40,000 crores.  

In the morning, experts suggested that if petrol and diesel prices were decontrolled, prices would climb by about Rs 3 a litre, which is the difference between what the import price that the government pays for petrol, and its retail price.

The government-owned Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum currently lose Rs 203 crore per day on selling fuel at subsidised rates.

Besides Mukherjee, the EGoM on fuel prices includes Oil Minister Murli Deora, Agriculture Minister Sharad Pawar, Chemical and Fertiliser Minister M K Alagiri, Railway Minister
Mamata Banerjee, Road Transport Minister Kamal Nath and Planning Commission Deputy Chairman Montek Singh Ahluwalia.

Ahead of the ministerial meeting on Monday, Ahluwalia  said, when asked about whether this is the right time to raise prices, "For six months, I have been saying we should...I haven’t changed my mind."

Earlier, Ahluwalia had told PTI in an interview, "India’s international economic reputation requires us to say that fuel prices are going to be linked to global prices. I think that linkage (of fuel prices with global prices) is unavoidable."

However, he favoured providing subsidised kerosene to the poor - stressing on the need for exploring the possibility of giving direct subsidy.

State-owned Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum 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