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Countdown to crude course

New Delhi, June 3: The government could take a call on a fuel price hike tomorrow, though a consensus still eluded its coalition partners.

“There is a cabinet meeting scheduled for tomorrow,” said external affairs minister Pranab Mukherjee, who also heads the group of ministers on fuel. He refused to say if the fuel price hike was on the agenda. Officials said the DMK and the Rashtriya Janata Dal, key constituents of the government, have been opposing a rise in the prices of diesel, kerosene and domestic LPG.

They said the two parties were loath to antagonise the aam admi, on whose support the UPA rode to power four years ago. In petrol, they are open to only a marginal hike.

Mukherjee left for Chennai today to garner support of the DMK for a move that is increasingly become more urgent in the wake of the surge in the price of global crude oil.

Officials said the success of his visit would decide the future course of action on fuel price. They said the cabinet committee on political affairs is scheduled to meet early tomorrow morning to reach a consensus on prices. If there is a consensus, the cabinet committee on economic affairs would take a call on the hike.

The Left parties have opposed any hike and suggested alternative remedies to cope with the crisis.

Prime Minister Manmohan Singh indicated the inevitability of a hike yesterday when he said at a meeting of the Associated Chambers of Commerce and Industry that “we cannot allow the subsidy bill to rise any further. The government can insulate the poor up to a point but the economic pricing of oil is essential to sustain growth.”

He said energy prices were not correctly aligned with global trends and the situation cannot continue for ever. “We need a further political consensus to adopt more rational economic policies.”

However, the government has limited manoeuvrability in raising prices, especially of diesel, as higher fuel prices will worsen inflation.

A combination of measures such as a marginal hike in the price of petrol, a duty recast and more oil bonds is being considered.

It is learnt that the government is weighing the possibility of increasing the price of petrol by Rs 2-4 a litre and of domestic LPG by Rs 20 a cylinder. The price of diesel is likely to remain unchanged — hiking its prices is not desirable as the fuel is used in trucks which transport commodities. A price rise will, therefore, push up the sale price of commodities.

State-owned oil marketing companies — Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited — projecting an under-recovery of Rs 2,35,000 crore in 2008-09.

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