Prices of petrol and diesel will not be reduced immediately as oil companies continue to make losses even after the recent fall in international oil prices, Petroleum Minister Murli Deora said on Wednesday.
"International prices have gone down but not to the extent that will warrant a price cut," he told the Economic Editors Conference in New Delhi.
Prices for the Indian basket of crude oil are now in the range of $56-58 per barrel compared to about $67 a barrel when on June 5 petrol price was raised by Rs 4 a litre and diesel by Rs 2 per litre.
"At the current level of prices, the oil marketing companies are still incurring losses on diesel, kerosene and LPG," he said, adding if prices fell further, there could be some scope for a price cut.
While on petrol, oil firms were making a profit of more than Rs 4 per litre, on diesel they were incurring a loss of Rs 1.62 per litre. On kerosene, they were losing Rs 14.75 per litre and Rs 102 per LPG cylinder.
Petroleum secretary M S Srinivasan said the loss on diesel, LPG and kerosene sale in November will be Rs 2,700 crore (Rs 27 billion).
"We do not want to decide on the prices on short term trends. The futures market predicts a price of $64 in January and $75 in June and so any reduction now will be premature and short-lived," he said.
A cut in petrol and diesel prices can be considered if international oil prices falll to $52 a barrel, he said.
Deora denied that any paper was being prepared for a possible price cut.
"(May be) someone is preparing (it) on our behalf," Srinivasan said in lighter vain.
"The international oil prices continue to fluctuate. For instance the Indian basket has increased over a dollar per barrel yesterday," Deora said.
The government, he said, is keeping a close watch on the volatile prices though seasonal oil prices are expected to increase during the winter months.
"While the government is aware that there is an opinion that domestic retail prices may be reduced, in view of continuing under-recoveries on diesel, kerosene and LPG, a review would be considered after a more permanent drop in international prices," he said.
Srinivasan said the four sensitive products of petrol, diesel, LPG and kerosene make up for 66 per cent of the total volume of petroleum products. Of this, oil firms were making money on petrol, which accounts for only 8 per cent of the volume. And the rest 58 per cent were still being sold at a price below cost.
The domestic retail price of kerosene, he said, is frozen at $28 per barrel, while LPG price is pegged at $33 per barrel.
"What it means is that till prices fall to these levels, oil companies will continue to make losses on these products," he said.
The current diesel price has been pegged at $54 a barrel, while petrol price is benchmarked to $58. Since international oil prices have fallen to around $56 a barrel, the companies are making profit on petrol but continue to make losses on diesel.
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