Petro price hike looks imminent

The government on Wednesday broadly hinted about a hike in petrol and diesel prices, saying although it has kept retail prices unchanged it cannot do so for long given the rise in crude oil rates.

"We are trying very hard to see that prices are not increased (but) I cannot say if they will never be raised," Petroleum Minister Murli Deora told reporters in New Delhi.

He said Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum were losing Rs 195 crore (Rs 1.95 billion)per day on account of selling petrol, diesel, domestic cooking gas and kerosene below the cost price.

"I don't know how long can we sustain this," he said. Deora said he has held discussions with Finance Minister P Chidambaram on fiscal measures to ease burden of oil firms so that a fuel price hike can be avoided.

Petroleum Ministry is seeking at least one-third of the projected Rs 55,000 crore (Rs 550 billion) under-realisation on fuel sale this fiscal, be met through issue of oil bonds.

An equivalent amount would be contributed by upstream firms like ONGC. Asked if his ministry was open to other fiscal measures as was suggested by Finance Minister P Chidambaram on Wednesday, Deora said measures like reducing excise duty and shifting from ad-valorem

rates to fixed rates were long pending demands that would certainly help ease the burden of spurt in international oil prices.

"No decision has been taken as yet and consultations will continue," he said, adding that he had briefed about the situation to Prime Minister Manmohan Singh and was also in touch with the leaders of Left parties.

Petrol and diesel prices were cut by Rs 2 a litre and Re one per litre respectively in February, but since global oil prices have appreciated.

The Indian basket of crude oil has averaged $72.31 per barrel this month, up 14 per cent from February.

Oil firms are losing Rs 5.50 a litre on petrol, Rs 4.45 per litre of diesel, Rs 187 per LPG cylinder and Rs 14.70 per
litre on kerosene sale and Deora has asked the finance minister to issue oil bonds worth Rs 19,000 crore to absorb one-third impact of the surge in international oil prices.

Last fiscal, the government had issued oil bonds worth Rs 24,121 crore (Rs 241.21 billion) to IOC, BPCL and HPCL to compensate for one-third of losses on sale of petrol, diesel, LPG and kerosene. ONGC, GAIL and Oil India contributed an amount a little higher than this figure.