The Hindu Business Line : Cabinet likely to decide on fuel price increase today

The options for petrol price hike include Rs 3, Rs 5 or Rs 7 a litre increase and on diesel Rs 2, Rs 3 or Rs 4 a litre. LPG prices may be raised by Rs 20 a cylinder.

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New Delhi, June 3 A final decision on whether the domestic fuel prices would be raised or not to partially offset the revenue loss suffered by the public sector oil marketing companies (OMCs) could be expected on Wednesday when a Cabinet meeting is likely to take place.

With political consensus eluding the decision, the past week saw hectic political consultations on a proposed relief package for the OMCs.

The compensation package is likely to include a hike in fuel price, a duty rejig, more contribution by upstream companies, and oil bonds. Reeling under pressure due to a surge in global crude oil prices, the OMCs have been incurring heavy revenue loss on sale of petrol, diesel, cooking gas, and kerosene below the market price. The OMCs — Indian Oil Corporation, Hindustan Petroleum Corporation Ltd, and Bharat Petroleum Corporation Ltd — are losing over Rs 700 crore a day on sale of these products.

While the Petroleum Ministry has been seeking a Rs 10-a-litre hike in petrol, Rs 5 a litre increase in diesel and Rs 50 a cylinder in LPG prices, however, the increase may be marginal. Declining to give any numbers, sources said various options are being considered. The options for petrol price hike include Rs 3, Rs 5 or Rs 7 a litre increase and that on diesel Rs 2, Rs 3 or Rs 4 a litre. LPG prices may be raised by Rs 20 a LPG cylinder.

The Prime Minister, Dr Manmohan Singh, has held four rounds of discussions with the UPA Chairperson, Ms Sonia Gandhi, on the issue. The External Affairs Minister, Mr Pranab Mukherjee, who also heads a Group of Ministers on fuel prices, told newspersons at sidelines of a conference here, “We are still discussing the issue. There is a Cabinet meeting scheduled for Wednesday.” He, however, refused to say if fuel price hike was on the agenda.

Official sources said the Cabinet Committee on Political Affairs (CCPA) is expected to meet on Wednesday to reach a consensus on raising petrol, diesel and LPG prices.

The CCPA meeting will be followed by a Cabinet Committee on Economic Affairs (CCEA) meeting. The three public sector OMCs are estimated to lose Rs 2,46,600 crore this fiscal on sale of petrol, diesel, LPG and kerosene as they are not allowed to raise the retail selling price in tandem with the international crude prices. Indian Oil Corporation alone is estimated to lose Rs 1, 33,000 crore in the fiscal.

Recovery on sales

The under recovery on sale of petrol as on June 1 has jumped to Rs 21.43 a litre from Rs 16.34 till last week. The loss incurred on sale of diesel stood at Rs 31.58 a litre (Rs 23.49 a litre).

The under realisation on sale of kerosene was up at Rs 35.98 a litre (Rs 28.72 a litre) and losses on domestic LPG has jumped to Rs 352.99 a cylinder (Rs 305.90 a cylinder).

The OMCs calculate import parity price of auto fuels — petrol and diesel — on the first and 16th of every month based on the average of the previous fortnight. The calculations for LPG and kerosene prices are done once a month based on monthly average imported price.