New Delhi: Get ready to pay more for petrol, diesel and LPG. After dilly-dallying for months, the government is said to have mustered the political courage to do what till some time back was considered impossible: free petrol and, more importantly, diesel prices.
An empowered group of ministers headed by finance minister Pranab Mukherjee is scheduled to meet on Monday to consider the Kirit Parikh Committee report, which calls for freeing petrol and diesel prices from government control.
“Earlier, there were doubts if the government would actually free auto fuel prices — particularly diesel — as the hike required to bring them on a par with international rates was over Rs6 per litre. But a fall in global oil prices has made the government’s task easier,” an oil ministry official said.
A free-pricing decision means both petrol and diesel prices will go up by around Rs3.50 per litre considering the current price of crude oil of $72 per barrel.
Any fresh increase in international crude would automatically and immediately hike both petrol and diesel prices under the free-pricing regime.
The Kirit Parikh panel had also recommended an increase of Rs6 per litre of kerosene and Rs100 per cooking gas cylinder, apart from a Rs80,000 levy on diesel cars.
“A Rs20-25 per cylinder increase in LPG price may be approved,” said sources.
Crucially, the Parikh panel suggestions have been endorsed by the oil ministry, the sources said.
Oil marketing companies such as Hindustan Petroleum and Bharat Petroleum currently sell petrol at a loss of Rs3.35 per litre, diesel at a loss of Rs3.49 per litre, kerosene for the public distribution system at a loss of Rs18.82 per litre and LPG at a loss of Rs261.90 for every 14.2-kg cylinder.
If the hikes indeed come through on Monday, it will be the fifth time in the last year and a half that they will rise.
The government had increased fuel prices in February and June 2009, and February and April 2010 due to higher taxes and raw material prices.
Crude prices have nearly doubled over 18 months from around $40 per barrel.
Oil marketing companies have been selling diesel, petrol, kerosene and cooking gas at prices much below procurement costs, thereby accumulating losses of nearly Rs46,000 crore last year.
Oil companies such as Indian Oil, Hindustan Petroleum and Bharat Petroleum have to buy even crude produced in India at international prices.
Indian Oil, which accounts for around 40% of fuel sales in the country, said last week it was losing Rs105 crore per day because of low retail pricing.
Since the government has never cut taxes to reduce the burden on oil companies, analysts expect it to increase the selling price again.
Petro price hikes are a politically sensitive issue also because of their cascading effect on the prices of vegetables, food grains, and manufactured goods; any rise stokes inflation in the economy, bringing down the purchasing power of people, especially the poor.
–Agencies–