A Ministerial panel may on Monday decide on raising petrol and diesel prices by up to Rs. 3.50 a litre and domestic LPG rates by Rs. 25-50 per cylinder, besides considering raising kerosene prices marginally.
The Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, will meet on Monday afternoon to consider the Kirit Parikh Committee report that calls for freeing of petrol and diesel prices from government control, besides a steep hike in LPG and kerosene rates to cut the subsidy bill.
“Selling fuel at rates below their imported cost is unsustainable. If prices are not hiked, the government will have to find ways to make up for the Rs. 72,300 crore deficit arising from selling petrol, diesel, domestic LPG and kerosene below their imported cost,” an Oil Ministry official said.
In all probability, decontrol of petrol prices looks certain, and if done, the rates would go up by Rs. 3.35 per litre, which being the difference between the retail price and imported cost. Mr. Mukherjee may even push for freeing pricing of diesel — the nation’s most consumed fuel that is used in transport sector and hence has inflationary impact.
“It (diesel price decontrol) will depend a lot on allies like (Railway Minister and TMC head) Mamata Banerjee. If she agrees, the diesel pricing will also be freed,” he said.
Also on cards is a Rs. 50 per cylinder hike in domestic LPG prices, which may be moderated if Ms. Banerjee and other allies in the ruling UPA insist.
A marginal increase in politically sensitive kerosene, which is used by the masses, may also be proposed at the EGoM and the jury is still out on its acceptance by the constituent ministers, the official said.
The EGoM will have to raise the price of petrol by Rs. 3.35 per litre and that of diesel by Rs. 3.49 a litre to free them from government control.
Petrol in Delhi currently costs Rs. 47.93 a litre, while diesel is priced at Rs. 38.10 a litre.
Decontrol of auto fuel prices has become easier for the government after international crude oil prices fell over $10 to quote at $72-74 a barrel.
“The hike needed to free auto fuel prices till last week was Rs. 6.07 a litre in petrol and Rs. 6.38 a litre in diesel. Raising prices, particularly that of diesel by such an amount in one go, was considered politically difficult. But now the hike needed is pretty reasonable (as crude oil has become cheaper),” he said.
State-owned Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum currently lose Rs. 203 crore per day on selling fuel below imported cost.
They currently sell petrol at a loss of Rs. 3.35 a litre, while that for diesel is Rs. 3.49, Rs. 18.82 for PDS kerosene and Rs. 261.90 for every 14.2-kg LPG cylinder.
The official said the EGoM may not agree with the Parikh Committee’s recommendation of raising the kerosene price by Rs. 6 per litre and LPG rates by Rs. 100 per cylinder. “These will have to be moderated.”
Besides Mr. Mukherjee, the EGoM on fuel prices also includes Oil Minister Murli Deora, Agriculture Minister Sharad Pawar, Chemical and Fertiliser Minister M.K. Alagiri, Railway Minister Mamata Banerjee, Road Transport Minister Kamal Nath and Planning Commission Deputy Chairman Montek Singh Ahluwalia.
State retailers are projected to lose Rs. 72,300 crore in revenue this fiscal if fuel prices do not change.
According to the terms of reference (ToR), the EGoM is to consider a pricing policy for petrol and diesel, including decontrol, he said, adding that it also has to decide on ways to bridge the deficit between the imported rate and retail price of LPG and kerosene.