Srinivasan: Tough task

New Delhi, July 3: The government would review fuel prices in October, oil secretary M.S. Srinivasan said today.

Officials, however, said the government would be reluctant to increase prices and might prefer to issue more oil bonds and tweak duties.

Polls are due in six states later this year, and the Lok Sabha election will be held next year. Any increase in fuel prices will cause widespread discontent among the electorate.

At an oil conclave in Madrid, Srinivasan said India’s crude import bill might jump to $110-120 billion this fiscal. In volume terms, the rise will be 5-6 per cent.

In 2007-08, the import bill was $67.98 billion and the country had imported 121.67 million tonnes of crude oil.

This fiscal, India may need to import more crude as Reliance Petroleum’s export-oriented refinery is scheduled to be commissioned in August-September.

Last month, the government had hiked the price of petrol by Rs 5 a litre and diesel by Rs 3 a litre to take into account higher crude oil prices, which were hovering at around $113 a barrel. Since then, crude price has shot up to $146 per barrel.

Along with the hike, the government had announced an across-the-board cut in customs duty of 5 per cent. It brought down the rate on crude to zero, on petrol and diesel to 2.5 per cent from 7.5 per cent and on other products such as aviation turbine fuel to 5 per cent from 10 per cent. Besides, the excise duty on petrol and diesel has been cut by Re 1 a litre to Rs 13.45 and Rs 3.60, respectively.

Keeping fuel prices fixed will mean higher losses for state-run oil marketing companies. They are expecting a loss of Rs 2,45,305 crore in 2008-09, assuming an average price of the Indian basket of crude at $125 per barrel.

The government will issue oil bonds of Rs 1,35,000 crore and has already made a provision of Rs 95,000 crore. Upstream oil companies will have to bear a subsidy burden of Rs 45,000 crore.

Eighty-five per cent of this burden will be borne by the Oil and Natural Gas Corporation, while the rest will be shared between Oil India and GAIL (India) Ltd.

Officials said to bring down the losses of the companies to zero, the price of petrol needs to be raised by Rs 14.92 per litre, diesel by Rs 24.90 per litre, kerosene by Rs 38.09 per litre and LPG by Rs 338.53 per cylinder.

Pipeline push

India expects an agreement on the Iran-Pakistan-India gas pipeline to be signed by next month, petroleum minister Murli Deora said at the World Petroleum Congress in Madrid.