New Delhi, May 31: Moves are afoot to have a price band for fuels within which oil companies will be free to fix rates.
An empowered group of ministers is likely to meet next Monday to discuss a pricing strategy at a time PSU oil marketing companies are staring at annual revenue losses of Rs 90,000 crore because of their inability to fix prices.
However, oil firms will be allowed to revise the prices of petrol and diesel on a monthly or quarterly basis, meaning prices will not fluctuate with daily changes in crude rates.
The pricing of auto fuel will not be a complete free market play
there will be checks and balances for the government to intervene to prevent too much volatility in retail prices, a petroleum ministry official said.
Finance minister Pranab Mukherjee heads the eGoM, which also has 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 as its members.
The Kirit Parikh committee had recommended free pricing of petrol and diesel and a hike of Rs 100 per LPG cylinder and Rs 6 per litre for kerosene.
In the last fortnight, the Indian basket of crude had hovered in the range of $68-$85 a barrel. Global crude surged from $37 a barrel in April 2004 to $147 a barrel in July 2008 and plunged to about $33 a barrel in December that year. Since then, it has steadily climbed and is now trading at around $70-$80 a barrel.
The officials said a stable policy would enable oil firms to plan their strategies more effectively in areas such as marketing, inventories and hedging.
A fuel duty formula could also be worked out so that the tax would increase with the fall in global crude prices and vice-versa.
State-owned oil retailers today slashed the price of jet fuel, or ATF, by over seven per cent, a move that will cut the fuel bill of airlines. The reduction follows a more than $10 per barrel drop in international crude prices to around $72-$73 per barrel.