Date:26/07/2007 URL: http://www.thehindu.com/2007/07/26/stories/2007072660311400.htm

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Fuel price hike in the offing?

Sujay Mehdudia

Firms suffering losses: Deora

Fiscal measures likely to ease burden of oil firms
Ministry for issue of oil bonds

NEW DELHI: Faced with a scenario of rising international crude oil prices, the Government may go in for a hike in the prices of petrol and diesel.

“We are trying very hard to ensure that prices are not increased, but I cannot make a commitment they will never be raised,” Petroleum and Gas Minister Murli Deora told newspersons here.

Mr. Deora said the crude oil prices had gone up drastically during the last few months in the international market and the Indian basket stood at $73 a barrel. The prices of petrol and diesel, however, remained unchanged since February.

Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum Corporation Limited were losing Rs.195 crore a day on account of selling petrol, diesel, LPG and kerosene below the cost price. “I am not hinting at a hike but I do not know how long we can sustain this situation.”

Mr. Deora said he held discussions with Finance Minister P. Chidambaram on the possible fiscal measures to ease the burden of oil firms so that a fuel price hike could be avoided.

“I have also briefed Prime Minister Manmohan Singh on the situation on the oil prices front and I was also in touch with the leaders of the Left parties.”

The Petroleum Ministry was seeking that at least one-third of the projected Rs.55,000 crore under-realisation on fuel sale this fiscal be met through issue of oil bonds. An equivalent amount would be contributed by upstream firms such as Oil and Natural Gas Corporation.

Measures such as reducing excise duty and shifting from ad valorem rates to fixed rates were long-pending demands that would certainly help ease the burden of spurt in international oil prices. “No decision has been taken as yet and consultations will continue,” the Minister said.

Petrol and diesel prices were cut by Rs. 2 a litre and Re.1 a litre in February. But since global oil prices have gone up tremendously, oil firms are losing Rs. 5.50 a litre on petrol, Rs. 4.45 a litre on diesel, Rs. 187 an LPG cylinder and Rs.14.70 a litre on kerosene.