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Rediff.com  » Business » Diesel, LPG prices to rise after Sonia returns from US

Diesel, LPG prices to rise after Sonia returns from US

September 05, 2013 20:07 IST

A decision on raising diesel prices by Rs 3-5 per litre, kerosene by Rs 2 and LPG by up to Rs 50 per cylinder will be taken after UPA Chairperson Sonia Gandhi returns from US, top government officials said.

"It is a political decision. The Congress Core Group will have to first decide on it before it can be considered by the Cabinet Committee on Political Affairs (CCPA)," an official said.

Sonia Gandhi left for the United States on September 2 for a medical check-up and is expected to be back in about a week.

The official said on her return, the Congress core group can meet to deliberate on the price hike that has become essential in view of over 20 per cent dip in rupee value against US dollar this fiscal, making oil imports costlier.

Another official said no proposal for a price hike has so far been moved for the consideration of the Cabinet. "The window for raising prices is only till September after which poll process in states like Delhi and Rajasthan will start," he said, adding that a decision on raising prices was expected in couple of weeks time.

Oil Minister M Veerappa Moily said there is no proposal to raise prices as of today but refused to make the same commitment about the future.

"Today, I don't have any proposal to hike prices. We live in a dynamic economy, no one can say this will be the price after a week or 10 days. Today, I have not decided," he told reporters.

Moily had on August 30 written to Prime Minister Manmohan Singh seeking urgent steps to tackle a record Rs 180,000 crore of losses arising from plunging rupee and surging oil rates.

Without a price increase, the government will have to shell out a record Rs 97,500 crore to subsidise diesel and cooking fuel.

Despite eight increases totalling Rs 4.75, losses on diesel sales have widened to Rs 12.12 per litre because of plummeting rupee. Also, kerosene is being sold at a discount of Rs 36.83 per litre to its cost while Rs 470 is the loss on sale of every 14.2-kg cylinder of LPG.

Moily told the Prime Minister Manmohan Singh that the total revenue loss this fiscal comes to Rs 180,000 crore. Even after upstream firms like ONGC chip in Rs 70,500 crore, a gap of Rs 97,500 crore would be left.

A one rupee increase in diesel price will cut loss by Rs 4,522 crore in remainder of current fiscal while a Rs 3 per litre increase would trim losses by Rs 13,565 crore. If rates are raised by a one-time Rs 5 per litre, the losses would be cut to Rs 29,390 crore.

The hikes proposed are one-time and are outside monthly revision in rates of 50 paisa happening since January. Similarly, a Rs 50 per cylinder increase in LPG rates would trim cooking gas losses by Rs 2,604 crore.

Besides, a possible Rs 2 per litre hike in kerosene price would cut losses by Rs 1,014 crore. The three price increases together would bring down government's subsidy outgo to Rs 50,928 crore, he had argued. 

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