The government on Monday decided to hike petrol price by Rs 4 a litre and diesel by Rs 2 per litre but spared any hike in retail selling price of domestic cooking gas (LPG) and kerosene for public distribution system.
The hike approved by at a meeting of the Union Cabinet, chaired by Prime Minister Manmohan Singh, was only a fraction of the increase actually needed to offset the spiralling international oil prices.
Petrol prices needed to be raised by Rs 9.33 per litre, diesel by Rs 10.43 a litre, PDS kerosene by Rs 17.16 per litre and domestic LPG by Rs 114.45 per cylinder.
A Rs 4 a litre hike in petrol and Rs 2 per litre increase in diesel prices would give oil firms Rs 9,200 crore (Rs 92 billion), still a far cry from the projected Rs 73,500 crore (Rs 735 billion) revenue loss projected for 2006-07 due to firming up of global oil prices.
While petrol and diesel prices were last revised in September 2005, kerosene prices have remained unchanged since March 2002 and LPG since November 2004 despite a 60 per cent jump in cost of raw material (crude oil).
Sources said Deora proposed that the share of subsidy burden on upstream firms - ONGC, GAIL and OIL - be raised to Rs 24,000 crore (Rs 240 billion) this fiscal from Rs 14,000 crore (Rs 140 bilion) last year to partly offset the Rs 73,500 crore under realisation.
The current retail prices at Delhi correspond to a price of around $26 per barrel for kerosene (global prices ruling at $ 87.04 per barrel), $272 per tonne for LPG ($ 470 per tonne global price), $60 per barrel for petrol ($88.53 per barrel international price) and 56 $ per barrel for diesel ($ 83.98 per barrel imported cost).
Petroleum Ministry projected under-realisation of Rs 8390 crore (Rs 83.9 billion) on petrol, Rs 37,940 crore (Rs 379.40 billion) on diesel, Rs 19,403 crore (Rs 194.03 billion) on kerosene and Rs 7,779 crore (Rs 77.79 billion) on LPG this fiscal if either prices or duties were kept unchanged.