Amid indications that the United Progressive Alliance (UPA) government was all set to put in place a partial "free fuel pricing regime" to cut down the losses of oil marketing companies and end the "subsidy culture", Union Petroleum and Natural Gas Minister Murli Deora is understood to have met Finance Minister Pranab Mukherjee on Sunday to discuss the fuel price hike and other related issues.
The meeting comes close on the heels of the one Mr. Deora had with Prime Minister Manmohan Singh on Saturday.
The Empowered Group of Ministers (EGoM), headed by Mr. Mukherjee, is scheduled to meet on Monday and discuss the oil price hike issue, including the Ketan Parik Committee report, which has recommended an across-the-board hike in the prices of petrol, diesel, LPG cylinders and kerosene to put an end to the "bleeding of public sector oil companies".
It is learnt that both ministers discussed the extent of "oil reforms" and products that could be covered under the free pricing policy sought to be introduced. The Finance Ministry has been pressing the Petroleum Ministry to take 'bold steps" to unshackle the petroleum sector and bring the domestic prices of at least petrol and diesel on par with the movement in the international crude oil prices, which currently stand at around $72 per barrel.
Both ministers also discussed measures to protect consumers in case of high volatility in the crude oil prices. It is being discussed that a price band mechanism should be put in place to ensure that if crude oil prices crossed those levels, the government would intervene in both the public as well as private sectors to protect the common man.
Earlier in the day, Mr. Deora also held high-level consultations with senior officials of his ministry and heads of oil marketing companies to assess the impact of the ever-rising fuel subsidy bill.
During the meeting, officials said this was the right time to introduce reforms in the petroleum sector as the crude oil prices were moderate and the impact would not be much on consumers.
The Centre only last week gave authority to ONGC and OIL to sell their additional natural gas in future at a market price of $4.20 mmBtu, thereby dismantling the Administered Price Mechanism regime.
"Selling fuel at rates below their imported cost is unsustainable. If prices are not hiked, the government will have to find ways to foot the bill of the Rs.72,300 crore subsidy arising out of the sale of petrol, diesel, domestic LPG and kerosene below their imported cost," a senior official said.
If petrol prices are decontrolled, the rates would go up by Rs. 3.35 per litre and diesel by Rs. 3.45 per litre, which is the difference between the retail price and imported cost.
The other members of the EGoM include Agriculture Minister Sharad Pawar, Chemicals and Fertilisers Minister M.K. Azhagiri, Road Transport and Highways Minister Kamal Nath, and Planning Commission Deputy Chairman Montek Singh Ahluwalia.