New Delhi, May 19: The Prime Minister’s Office today reviewed the prices of essential commodities, including that of fuel, with global crude oil prices surging to an all-time high of around $127 a barrel and inflation perilously close to 8 per cent.

Officials said the government might take a call after the Karnataka polls on either marginally raising petrol prices or cutting the customs duty on crude to reduce the burden on state-run oil marketing companies.

They said the global crude price was expected to rule at $141 a barrel in the second half of this calendar year. Investment bank Goldman Sachs has forecast that the oil price would nestle at the $141-level.

Hiking diesel 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.

On the other hand, petrol is seen as a fuel used by car-owners. The government may also consider reducing the 5 per cent customs duty on crude to either zero or to at least 3 per cent, on a par with what it will be offering Asean (Association of South East Asian Nations) countries in the proposed free trade pact.

The government will also have to take a call on increasing the amount of bonds to the oil companies.

As the losses of the oil companies for this fiscal year mount, the petroleum ministry and the finance ministry are battling it out on the quantum of losses incurred by the companies in 2007-08 for selling fuel below costs.

Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) lost Rs 77,304.50 crore on fuel sales in 2007-08, but the finance ministry has provided for a loss of just over Rs 70,500 crore for the purpose of compensation. The government now compensates 42.7 per cent of the revenue loss through the issue of oil bonds, which may be raised to 50 per cent.

The oil companies are likely to face losses of nearly Rs 200,000 crore this fiscal. They are demanding the government’s approval for cost-cutting measures, so that their investment and expansion plans are not affected. Losses of the trio stand at Rs 550 crore a day.

Branded fuel

The petroleum ministry appears to have given its tacit support to the move by the oil companies to increase the supply of branded fuel.

Branded fuels from IOC, BPCL and HPCL are not controlled by the government and priced higher than normal fuels. Branded petrol costs between Rs 3 and Rs 4 a litre more than normal, or unbranded, petrol. In diesel, the price is higher by Rs 1.25-2 per litre.

Petrol pump dealers are opposed to the move.

“Oil companies are leaving no choice with consumers. They will be forced to buy expensive fuel,” said Ajay Bansal, general secretary of the Federation of All India Petroleum Traders, a body that claims to represent the owners of 37,000 petrol pumps in the country.

Bansal said there would be a general body meeting of the organisation in Pune on Saturday where the dealers would be mulling an indefinite strike.