Although the much anticipated hike in fuel prices did not happen as the Union Cabinet which met on Thursday did not discuss the issue, there are enough hints that increase in prices of petrol, diesel, LPG and kerosene is on the cards and unavoidable. There has been fierce opposition from the key allies of the United Progressive Alliance to a hike.
Union Petroleum and Natural Gas Minister Murli Deora will meet Finance Minister Pranab Mukherjee on February 14 to explore the possibility of a hike. The meeting will also explore the possibility of extending financial support to the OMCs.
The Finance Ministry has given Rs.12,000 crore oil bonds to oil marketing companies (OMCs) and been reluctant to foot the entire subsidy bill, asking the Petroleum Ministry to implement the Kirit Parikh Committee recommendations on petroleum pricing.
Mr. Deora also met Prime Minister Manmohan Singh after the Cabinet meeting and presented him a memorandum seeking compensation to the OMCs on account of under recovery in sale of petroleum products.
Official sources said the Petroleum Ministry proposal did not form part of the agenda of the Cabinet and therefore no discussion took place.
Mr. Deora has been holding consultations with key allies, including the Dravida Munnetra Kazhagam and the Trinamool Congress, on the issue of total decontrol of petrol prices and a hike in prices of diesel, LPG and kerosene.
Trinamool leader and Railway Minister Mamta Banerjee, who did not turn up for the Cabinet meeting, is understood to have opposed any hike at this juncture when inflation has been inching up.
Without a hike, state-run OMCs will incur a revenue loss of Rs. 46,030 crore this fiscal. Of this, only Rs. 12,000 crore will come as subsidy support. Freeing of petrol prices will lead to an increase of Rs. 4.72 a litre. Sources said the Petroleum Ministry was willing to settle for Re.1 a litre increase in diesel rates, provided LPG and kerosene prices were also raised.
Petrol is now sold at a loss of Rs. 4.72 a litre, diesel Rs. 2.33 a litre, kerosene Rs. 18.06 a litre and domestic LPG at a discount of Rs. 287.59 a cylinder.