Ruling out any further hike in the prices of diesel and domestic LPG, Petroleum and Natural Gas Minister Jaipal Reddy said on Tuesday he was wary of applying another round of price hike though the current retail rates were lower than the cost of production.
The oil marketing companies (OMCs) are likely to post a phenomenal Rs.1,67,000-crore revenue loss on diesel, LPG and kerosene sale this fiscal. Last month, the government increased the diesel price by Rs.5.62 a litre and restricted the supply of subsidised LPG to six cylinders a household a year. “Even after these recent increases, the under-recoveries this financial year will be higher than last year.”
Mr. Reddy said the nation was facing a combination of two negative circumstances — the rising price of oil in the international market, from which India gets 79 per cent of its stock, and depreciation in the value of the rupee against the dollar, which made imports even costlier. The price of Indian oil imports had risen from $85.09 a barrel in 2010-11 to $111.89 in 2011-12. The rupee’s value dipped from 44.42 to a dollar in July 2011 to Rs.57.22 in June this year. “Between July 2011 and October this year, the Indian currency has devalued against the dollar by 16.34 per cent. Depreciation of the rupee by one against the dollar results in a burden of Rs.9,000 crore annually,” Mr. Reddy said.
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The OMCs are likely to post net losses in the second quarter too as the logjam in Parliament due to the coal blocks allocation issue has meant that supplementary demands for grants are not approved and no subsidy payout is possible till the winter session in December/January.
“Despite these measures of raising diesel prices and restricting supply of subsidised LPG, the under-recoveries of the OMCs for 2012-13 are projected to be around Rs.1,67,415 crore. Nevertheless, I do hope these difficult steps would help to contain the fiscal deficit and make scarce resources available to priority sectors,” he said.