Cost count

New Delhi, Feb. 4: The Manmohan Singh government is likely to increase the prices of petrol and diesel marginally this week, the first time in 20 months, to reduce losses suffered by state-owned oil companies for selling the fuels below cost.

However, indications are that the government will leave a duty rejig exercise for the budget.

Faced with polls in several key states and general elections later, the UPA government has been holding talks with the members of the alliance as well as with the Left, which is supporting it from the outside, to avoid political fallout from a hike in fuel prices.

With the losses of oil companies mounting to Rs 71,000 crore this fiscal, the government is considering a marginal fuel price hike in the range of Re 1 to Rs 2 to partly compensate their losses.

The government, however, is unlikely to change the prices of domestic LPG and kerosene.

Officials said the cabinet would meet soon to take a final decision on a hike. The cabinet generally meets every Thursday but can meet earlier, if necessary.

Sources said the government could go in for a marginal hike in fuel prices even at the risk of protests by the Left and the BJP.

However, it would try to score brownie points in the budget, which is only a couple of weeks away, by announcing cuts in excise and customs duties.

Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are losing Rs 10.6 per litre of petrol, Rs 11.6 per litre of diesel, Rs 331.4 per LPG cylinder and Rs 19.89 per litre of kerosene.

Oil firms will get compensated for 42.7 per cent of this revenue loss through oil bonds. Another 35 per cent may be compensated through assistance from upstream firms such as ONGC, GAIL (India) Limited and Oil India. This still leaves uncovered a gap of 22.3 per cent.

Crude price falls

Oil fell further below $89 a barrel on Monday, adding to sharp losses of the previous session, as fears over a possible US economic recession prompted more profit-taking.

US light crude for March delivery eased 51 cents to $88.45 a barrel by 1230 GMT, after tumbling more than 3 per cent on Friday. London Brent crude fell 45 cents to $88.99.