Get ready for a steep hike in cooking and auto fuel prices after September 8. Buzz is that the increase could be as high as Rs 5 a litre for petrol and almost the same or little less for diesel.
The Petroleum Ministry has approached the Cabinet Committee on Political Affairs to consider a hike in fuel prices. Sources in the know said that the Ministry had proposed various scenarios for revision, but had not given any specific numbers.
However, the Government may still shy away from deregulating diesel pricing. Sources said that a sense of urgency was being felt by everybody, but the issue had strong political ramifications.
The Petroleum Ministry has also suggested capping of subsidised LPG cylinders to four for each household with annual income of Rs 50,000 to Rs 6 lakh. At present, the subsidy on domestic LPG is unlimited, as there is no restriction on the number of refills supplied to a household.
The Standing Committee on Petroleum & Natural Gas (2010-11) on Demands for Grants (2011-12) in its report had said that to restrict the increasing subsidy burden, supply of subsidised domestic LPG refills should be done away with for people with an annual income of Rs 6 lakh and above, including those holding constitutional posts, public representatives like MPs, MLAs, MLCs.
According to estimates of public sector oil marketing companies (OMCs), the desired increase in retail price of diesel is Rs 19.26 a litre, kerosene sold under public distribution system is Rs 34.34 a litre and domestic LPG Rs 347 a cylinder.
Though petrol has been deregulated, an artificial Government control continues. This has led to OMCs selling petrol at almost Rs 5 a litre lower than market price. Public sector OMCs sell petroleum products at a regulated price, to cushion the impact of volatility in international crude oil and product prices.
The last revision in diesel, domestic LPG and PDS kerosene prices took place in June 2011. The price of petrol has been market-determined since June 2010.
Minister of State for Petroleum and Natural Gas R.P.N. Singh recently informed Rajya Sabha that the continuous increase in under-recoveries along with delay in release of Government compensation had deteriorated the liquidity condition of the public sector OMCs – Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd – requiring them to borrow from market at high interest cost to meet their working capital requirements and capital expenditure.
Singh also said that the Petroleum Ministry had been requesting the Finance Ministry for timely sanction and release of cash compensation to OMCs.
On whether the Petroleum Ministry would also be seeking duty cuts on these products, sources said that the States would not agree to this.
The Ministry has asked the Finance Ministry to consider bringing down the incidence of excise duty on petrol to offset the revenue loss incurred by OMCs for selling it below market price.
The OMCs, in order to mitigate losses on sale of petrol, have suggested to either declare the fuel as a regulated product temporarily and provide cash compensation or reduce the excise duty from Rs 14.78 a litre by an equivalent amount to the under recovery on it.