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.