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Go-slow on fuel price hike

New Delhi, July 3: The government will not raise prices of petroleum products even as crude oil simmers at the level of $70 per barrel.

Instead, the petroleum ministry wants its finance counterpart to release more oil bonds to cover up for the losses suffered by PSU oil marketing companies.

While the price of crude crossed $70 yesterday, that for the Indian basket rose to $69.62. A mix of Dubai sour crude and the sweet Brent variety in a ratio of 57:43 makes up the Indian basket.

Oil minister Murli Deora today said there was no immediate plan to raise prices of petrol and diesel.

Deora was responding to reports on plans by the government to raise petrol prices by Rs 2 a litre and diesel by Re 1.

“Nobody has discussed a hike in prices. Just now, there is no chance of any hike,” Deora said.

However, oil marketing companies are lobbying for a rise. They are suffering a loss of Rs 6 a litre on petrol and Rs 4 on diesel,

Revenue losses suffered by the PSUs — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation — for selling fuels below market rates are estimated at Rs 170 crore a day.

Deora will meet finance minister P. Chidambaram next week to discuss ways to compensate the PSUs.

The options are either to issue more oil bonds or reduce excise duties to lower the burden of the PSUs.

Officials said the oil ministry wanted at least one third of the under-recovery on fuel sales to be met through oil bonds.

A similar amount should be met as subsidies by upstream oil companies — the Oil and Natural Gas Corporation and GAIL.

The price of the Indian basket of crude has risen by more than 12 per cent since February when petrol prices were cut by Rs 2 a litre and diesel by Re 1.

In the current fiscal, the expected under realisation from petrol, diesel, LPG and kerosene sales is Rs 50,700 crore.

The loss on the sale of kerosene through the public distribution system is put at Rs 14.63 per litre. In LPG, the loss is Rs 189.14 per cylinder.

About Rs 24,121 crore of oil bonds had been issued by the government in 2006-07 to partially compensate the PSUs for their losses.

The Oil and Natural Gas Corporation, Oil India and GAIL have paid around Rs 20,000 crore to bridge the deficit.

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