Get ready for a possible fuel price hike. The Government has indicated that auto fuel price may be raised even before the Parliament session ends on September 6.
Concerned about the mounting pressure on the finances of the public sector oil marketing companies due to falling rupee and rising international crude oil prices, Petroleum & Natural Gas Minister M. Veerappa Moily met Finance Minister P. Chidambaram on Thursday to discuss solutions.
Indications are that the Petroleum Minister also discussed a possible one-time increase in diesel price and cut in duties. There is buzz of a possible Rs 3-4 a litre hike in diesel price.
Though Wednesday’s announcement of direct dollar facility by the RBI to the three biggest buyers – public sector oil marketing companies – played a key role in the rupee recovering by 225 paise on Thursday, it may not give enough comfort to the these companies.
The RBI opened a special facility to meet the entire daily needs of approximately $400-500 million for Indian Oil, Hindustan Petroleum and Bharat Petroleum. This brought some relief to the rupee which closed at 66.55 against the US dollar with over three per cent gain compared with its life-time low closing of 68.80 on Wednesday.
The companies sell diesel, domestic LPG and kerosene sold under public distribution system much below the cost price resulting in revenue loss.
A Re 1 depreciation adds Rs 8,000 crore to the total under recovery, while every dollar increase in crude oil price adds to the import bill. Now there is fear of both the subsidy and import bills rising. These are threatening to derail the fiscal deficit target of 4.8 per cent and current account deficit target of 3.7 per cent.
When asked about price revision, Moily said, “It is inevitable to hike petrol and diesel prices, that call we have not yet taken.”
However, he added that “After Parliament, before Parliament, there is no question. Whatever is necessary for the Indian economy, we will do it.”