With the Indian crude oil basket touching $123 per barrel on Monday and the Union government faced with a mounting subsidy bill that threatens to touch Rs. 1,50,000 crore, a sharp hike in the price of diesel, petrol and domestic Liquefied Petroleum Gas (LPG) cylinders is likely to take place soon after the conclusion of the Assembly polls in the five States next week.
With the government losses on selling fuel at subsidised rates threatening to go out of control, the oil marketing companies have mounted pressure on the government seeking a sharp hike in prices of petrol, diesel and LPG to cover up the mass losses due to volatility in the crude oil prices in the international markets.
The tensions between the United States and Iran coupled with latest European Union sanctions against Tehran have ignited the crude oil markets worldwide. “With the counting of votes scheduled for March 6, the hike in petrol prices could happen anytime after that. The current losses are virtually unsustainable,'' a senior OMC official said.
The Indian basket, which was hovering around $108 to $110 per barrel last month, has touched a new high of $123 on Monday. This has brought the government under tremendous pressure to hike prices of petroleum products immediately. The oil marketing companies (OMC) have already asked the government to give them permission to hike prices of petrol, diesel and LPG without any further delay.
For instance, Indian Oil Corporation (IOC) has lost about Rs. 443 crore since the last revision in petrol price on December 1 after which rates have not been changed because of crucial assembly elections in states such as Uttar Pradesh, Punjab and Uttarakhand.
OMCs are currently incurring a loss of Rs. 3-3.50 per litre on petrol, whose pricing was freed by the government from its control in June 2010. IOC lost about Rs. 1,277 crore in first nine months of current fiscal and another Rs. 360 crore after that.
Petrol price were last revised on December 1 when they were cut by Rs. 0.78 per litre to Rs. 65.64 per litre in Delhi. Besides petrol, the OMCs are losing Rs.14.50 per litre on diesel, Rs. 28.76 a litre on kerosene and Rs. 388 per 14.2-kg domestic LPG cylinder. IOC alone is losing Rs. 239 crore per day on sale of these three products and Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limtied are losing around Rs. 445 crore per day.
Sources in the state-owned oil companies said the hike could be Rs. 4 per litre for petrol, Rs. 5 for diesel and Rs. 70 per for LPG cylinder.