Hike in petrol, diesel prices likely after Friday

www.mangaloretoday.com

New Delhi,Sep 04, 2012: The oil ministry is preparing a Cabinet note on fuel price hike. An increase in petrol, diesel, domestic cooking gas (LPG) and kerosene prices looks "imminent" after the Finance Ministry said it has no money to provide for fuel subsidy.

Government sources told CNBC-TV18 that need to raise fuel prices will be part of the Cabinet note. It will entail facts on current underrecoveries. "This (hike) is imminent. There is no question of holding back now," a top oil ministry official said on Tuesday. In all possibility, prices may be increased after the current monsoon session of Parliament ends on Friday.

The quantum of the hike will be left to the Cabinet. Sources say the finance ministry is working on compensating oil-marketing companies for the first quarter. However, it is not clear whether the ministry will decide on compensation before the second quarter end.

Borrowings of the three fuel retailers have shot up to Rs 1,57,617 crore at end of June from Rs 1,28,272 crore as on March 31. Besides, they are losing close to Rs 5 per litre on petrol, a fuel that was decontrolled in June 2010 but rates of which haven’t moved in tandem with cost.

The Cabinet note may also discuss the need to cap number of LPG cylinders per family. It may entail discounting LPG subsidy to the rich.

Diesel, domestic LPG and PDS kerosene rates have not been changed since June 2011 even though cost of production has soared 28%. State-owned fuel retailers are losing Rs 560 crore per day on sale of diesel and cooking fuel, and are forced to resort to short-term borrowings to meet funds needed for importing crude oil (raw material).

Official don’t see the "coalgate" issue coming in way of Cabinet hiking prices.