Cash call

New Delhi, May 6: An empowered group of ministers (eGoM) led by finance minister Pranab Mukherjee is likely to meet later this month to consider increasing the prices of diesel, kerosene and domestic LPG cylinder.

Oil ministry officials said the panel would take a view on the amount of hike that could be effected in diesel, which is a politically sensitive commodity, and reducing the subsidy on domestic LPG cylinder by withdrawing the sop to higher income groups in a phased manner.

A parliamentary standing committee has recently said high income consumers should not be given subsidised LPG cylinders. Under the phased plan of the petroleum ministry, the supply of subsidised cylinders will be first stopped to MPs, MLAs and government employees in the rank of officers.

In the second phase, consumers earning more than Rs 50,000 per month will be paying full amount for their cooking gas. At present, oil companies sell cooking gas for Rs 405 per cylinder, suffering a loss of Rs 480 per unit.

Simultaneously, the panel would study the results of the pilot projects on direct transfer of kerosene subsidy to the poor in the Kotkasim tehsil of Alwar district in Rajasthan and LPG subsidy in Mysore.

Prime Minister Manmohan Singh recently said there was a need to rationalise fuel prices and at the same time, ensure that the poor are shielded from its effects.

Although petrol prices have been deregulated since June 2010, companies lose close to Rs 9 a litre as its price has not being adjusted to global trends. Retailers have also indicated at the possibility of fuel supply cuts if prices are not revised immediately.

A senior IOC official said, “Price hike is eminent, but it will happen once the finance bill and other important bills are passed…most likely it would happen after the end of Parliament session.”

The current session of Parliament ends on May 22.

The government controls the rates of diesel, domestic LPG and kerosene. Oil companies sell diesel at a discount of Rs 13.91 a litre, while they lose Rs 31.91 on the sale of every litre of kerosene. A 14.2-kg domestic LPG cylinder costs Rs 480.50 less than its actual cost.

State-owned oil companies have not raised diesel, domestic LPG and kerosene prices for almost a year despite cost of raw material rising by a quarter.

The three state-owned oil firms have lost around Rs 138,800 crore in revenues from selling diesel, domestic LPG and kerosene below cost in 2011-12, which is estimated to increase to Rs 208,000 crore in the current fiscal.