With yet another petrol price hike looming large, the Petroleum Ministry said on Wednesday that it was up to the oil marketing companies (OMCs) to decide on the issue since the fuel has been deregulated.
On the other hand, Petroleum and Natural Gas Minister S. Jaipal Reddy has sought a meeting of the Empowered Group of Ministers (EGoM) to decide on increasing the prices of diesel, domestic LPG and kerosene due to the growing under-recoveries from the sale of the subsidised fuels.
“It is for them [OMCs] to decide… they will take a decision at a right time,” Petroleum and Natural Gas Secretary G.C. Chaturvedi told journalists here. “Petrol is a deregulated commodity whose pricing is not decided by the government. The oil companies are empowered to take a view on it.”
The OMCs — Indian Oil, Hindustan Petroleum and Bharat Petroleum — are mulling over a hike in petrol prices by Rs.1.50 a litre (excluding levies), to cover losses due to the fluctuations in exchange rates. The OMCs have raised petrol prices thrice this year – in January by Rs.2.50 a litre (against a desired hike of Rs.3.72); in May by Rs.5; and in September by Rs.3.14. In December 2010, the prices were increased by Rs.2.96 a litre against the desired hike of Rs.4.90.
To push for increase
Mr. Reddy said the OMCs losses on the sale of diesel, domestic LPG and kerosene were increasing. “The EGoM meeting would take place before the winter session of Parliament [which begins on November 22]… a decision on raising prices may not be easy,” Mr. Reddy told journalists here after meeting Finance Minister Pranab Mukherjee, who heads the EGoM.
Stating that his Ministry would push for raising the prices of the three fuels, Mr. Reddy said the OMCs stood to lose over Rs.1.30-lakh crore this fiscal on selling diesel, domestic LPG and kerosene at rates below their cost. “Oil companies will soon find it difficult to get loans from Indian banks, let alone foreign banks… the companies are borrowing heavily to meet even working capital requirements as fuel selling price does not meet even operating expenses,” he pointed out.
As on November 1, 2011, the under-recovery in the case of diesel stands at Rs.8.58 a litre; kerosene at Rs.25.66 a litre; and domestic LPG at Rs.260.50 a cylinder. Today, the OMCs are incurring a daily under-recovery of about Rs.319 crore on the sale of the three subsidised items. In the first half of the current fiscal (April-September 2011), the OMCs reported a total under-recovery of Rs.64,900 crore — Rs.37,719 crore on diesel, Rs.13,361 crore on kerosene and Rs.13,820 crore on domestic LPG.