Though Petroleum and Natural Gas Minister Jaipal Reddy asserted on Friday that there is no immediate proposal to raise the prices of petroleum products, including petrol, the government seems to be bracing for an across-the-board hike in the prices of petrol, diesel, LPG cylinder and kerosene most likely by next week. Mr. Reddy also said difficult and painful decisions need to be taken.
It is learnt that the Prime Minister’s Office (PMO) and the Finance Ministry are strongly in favour of raising the prices to prevent bankruptcy of the oil marketing companies (OMCs) and their downgrading by international rating agencies.
It is also learnt that the Petroleum Ministry had moved a Cabinet note on the issue and the matter is likely to come up at a meting of the Cabinet Committee on Political Affairs (CCPA) next week.
Sonia factor
Similarly, sources in the government said UPA chairperson Sonia Gandhi was likely to return to India by this weekend and any hike would take place after consultations with her.
The Ministry has conveyed to the OMCs not to go ahead with a hike as it is feared that any singular hike in petrol prices will lead to strong opposition and force the government to re-think on a hike.
The OMCs are losing around Rs. 560 crore a day on sale of regulated diesel and cooking fuels and another Rs. 16 a day on petrol.
“We are, of course, facing treacherous crisis of unpredictable magnitude. Our oil companies will lose nearly Rs. 2,00,000 crore [if rates are not raised]. Steps need to be taken to reduce this deficit. We have to take some difficult, painful decisions,” Mr. Reddy said.
Political opposition
On political opposition, he said fuel pricing was a classic case of politics defeating economics. “It is my duty as a Minister to bring facts to the notice of the CCPA. When will it meet, I have no idea,’’ he said.
State-owned fuel retailers are losing over Rs. 5 a litre on sale of petrol, a commodity which was freed from government control in June 2010 but whose rates have not moved in tandem with cost. They sell diesel at a loss of Rs. 19.26 a litre, kerosene at Rs. 34.34 and domestic LPG at Rs. 347 a 14.2-kg cylinder.
Keywords: Fuel price hike, Oil marketing companies, oil PSUs, Jaipal Relly, oil ministry
As always, a lot of emotional notes being played out by hapless citizens. Removing the subsidy on diesel alone will make a serious dent in this situation. In any case, the subsidy raj is what is causing this huge under recovery. The same money can be pumped to the same social programs, without the heartache, if the subsidy is removed. The economy can very well absorb the temporary pain and will in fact, lead to a much less cumbersome revenue flow.
It was known and expected that prior to the price rise the Jaipal
Reddy and camp engaged in a bear cartel would make an announcement
that the rise is delayed so as to enable them to cover up their short
position. The CAG should investigate such acts of ministers who deploy
their post to make crony capital for their choosen ones. Otherwise, no
one asked for his statement either they will increase or decrease yet
he becomes 1+1/2 . The fact of the matter is that price rise is
inevitable due to the facts as under.
''FOR OIL PSU IT IS BETTER THAN NEVER. TIME AND TIDE DO NOT WAIT FOR
ANYONE AS FAILING TO DO SO MEANS RATINGS DOWNGRADE WHICH IS MORE
DIFFICULT COPE UP WITH. SECONDLY DIESEL IN PAKISTAN IS 50% MORE
EXPENSIVE WHICH MEANS INDIAN COMMODITIES ARE KEPT LOWER ARTIFICIALLY
THAN PAKISTAN SO THERE IS RAMPANT SMUGGLING OF GOODS AND DIESEL TO
PAKISTAN. THIS MEANS WE ARE SUBSIDIZING PAKISTAN TOO THAT IS ANTI
NATIONAL. ALL THIS SITUATION OF A MOUNTAIN OF ECOCOMIC CHAOS
Let us not speak complex calculations. Very simple, control or eradicate corruptions(if possible..?)prices will be stabilized.
What a catch-22 situation..If the Diesel price is increased,the cost
of commodities will increase as it will cost more to transport
goods(Vegetables,pulses etc)..If you increase the cost of Petrol,then
people cannot get to work and back efficiently..
Maybe...we need to think about securing oil reserves in oil rich
nations like Nigeria,Brazil(offshore),Canada..China is big on this
strategic approach.In lieu of oil China provides infrastructure
The Best way is to reduce comsuption of Petroleum products, Crude prices
will always keep rising since there are handful of resouces, there was a
news that Saudi Arabia would be net importer of Oil by 2030. Invest
heavily in infrastructure, less traffic jams, potholes, better and less
crowded public transport across the nation. I do not think Govt has will
to do all this.
Why don't they reduce taxes. Worst fellows are ruling India.. compare to present govt. British ruling was excellent.
What about taxes collected by the State and Centre on oil? If they can reduce their appetite for filling up their coffers, then both oil companies and the public will be at a benefit.
Nanda- Because our netas are the largest user group of those cars.
One thing I don't understand is how is it we are an economic tiger if
salaries are dormant while prices increase almost every day.
I still don't understand how when the petrol prices are not increasing
anywhere around the world so frequently as in India. I am from Bangalore
which has the highest petrol prices in India. I am hating Congress for
such absurd actions. Hopeless rule
Why does'nt the Government think of reducing the taxes on Petrol and diesel instead of howling the fact that the oil companies are losing 560 cr/day. With almost 50% of taxes added on to the petrol and diesel , the prices are already the highest int he world. By reducing the taxes on oil, let the government pass on the corrupt people's money back to the Oil companies which are at least ensuring oil supply
I was commenting on this subject everytime the price rise was announced. Truly, the govt has to think to sell diesel w/o subsidy for cars/SUV's/MUV's etc. Should have subsidy rates for the vehicles meant for public service/distribution.Please govt formulate a policy. People buying diesel cars since its fuel cost is lesser than petrol. if the rates are maintained same, they can buy whichever car they irrespective of fuel.
Bring back all the money from foreign banks owing to poor people of our country, who are starving for just one square meal a day even after independence from the British, yet deposited by the power starved politicians & their benamis for the betterment of their (legal) children, grand children, great grand children, industrialists, bureaucrats etc.,
This mighty herculean task could wipe off many problems we are facing today including removing tears of poor people who are suffering for want of basic needy things potable water, food, clothes and shelter.
The government must find a way to charge market price + environmental impact
costs on luxury vehicles, selfish use vehicles (SUV's) etc. Those who drive must pay
the actual cost plus societal impacts. Only then we as a society will learn to invest in
alternative technologies and modes of transit. This vulgar subsidy, which we can ill
afford is making our society into car happy Americans with a "I don't care " attitude.
Moreover, we can stop the bleeding of hard earned foreign exchange like $ into
others hands.
Well oil prices will have to be in line with crude import rates; agreed; but Govt must ensure the taxes levied are reduced IF they like to help common man - Tax is biggest source of revenue and high component of the price - And in case of diesel Yes,Govt MUST tax DIESEL Car owners HEAVILY to augment revenue; also take strict action against those who use Gas (taking advantage of subsidy, buy domestic LPG cylinders from customers who seldom use it but get from Govt scheme of help); another relevant question posed remains unanswered for long - HOW did oil Companies declared dividend and allot bonus shares ? Strange surprising silence here ! Govt, MPs and others MUST lay down stringent rules for use of OFFICIAL cars and MAKE it incumbent on them to pay EXTRA expenses incurred - who will dare do this? All big talk to help poor !
Incresing pertrol prices is going to help to the government only. why can't they impose more tax on the people who will buy the cars worth more than 10lakhs.
i see Fuel price hike is like butterfly effect. This will lead to further rise of prices of other consumptions goods,transport, day to day commodities.etc. making life tougher to the common man.Difficult times ahead!
The government should allow the private sector to run buses in cities. Unless this is done, majority of the middle-class people will continue to jam our roads with their 2-wheelers and cars. The amount of oil that is wasted in traffic-jams is preposterous.
No other options without a strong make over to the entire system. If they increase the price of diesel car and SUV the amount will goes to Govt not the oil co, so they will keep on increase the price up on loss. govt will keep on gain money by increase everything and spend them for Scam to fill their own Pockets. Poor india with have poor people everywhere.
Again!! I agree with Mr. Nanda's point of view. I can't understand the economics
behind this fuel price.
We understand that its difficult to manage the price rise since the international prices are roaring. But is that the only way? Petrol hike is directly proportional to comman man's daily/monthly budget. On top of that inflation, corruption and other imperfect things in this country. There are other ways as well, not need to subsidize diesel for private vehicles, additional taxes on premier luxury items including liquor. More importantly check a tab on black money, its huge in India. This is no policy govt, if they dont act now then future seems to be bleak of this country. May god give strenght to common man in India.
The Govt's lopsided policy on diesel, is being taken advantage of by well to do rich people who are using low priced diesel for their luxury cars. So why not either increase diesel car prices almost twice that of petrol prices or advise petrol pumps not to cater to passenger cars and give diesel only to goods carriers ( I do not how this can be done ).
Instead of increasing the fuel prices, why don't the govt increase the
road tax of Luxury diesel cars by a ten fold? They don't deserve any
subsidy for their diesel cars... They have all the money, make them pay.
Please don't punish poor Indians. Please.
life for middle class people is becoming tougher day by day.
Price increase has become inevitable, considering the bulging oil imports and scarce foreign exchange. It is simply not wise to de-link prices of petroleum products from international crude price. On the contrary, it is necessary to control consumption of petroleum products. Obviously, we need to devise a well thought strategic plan to deal with continuous rise in crude price. (2) Current policy of increasing only the petrol price in fits and starts should be replaced by a rational approach to pricing of all petroleum products. (3) It is necessary to adopt transparent policies for deciding prices of all petroleum products and also examine whether ad valorem duties need to be replaced by specific duties and taxes. (4) If the govt. cannot afford to do away with entire subsidy on diesel, kerosene and LPG for political reasons, to begin with it can certainly impose additional excise duty on diesel driven cars and sports utility vehicles.
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