Ministerial panel to decide on diesel price hike next week (Lead)

December 15th, 2010 - 10:20 pm ICT by IANS  

Pranab Mukherjee New Delhi, Dec 15 (IANS) A ministerial panel headed by Finance Minister Pranab Mukherjee will meet Dec 22 to decide whether state-run fuel retailers should hike the prices of diesel, with crude now costing around $90 per barrel in global markets.”As far as petrol prices are concerned, the government has already de-regulated this segment of transport fuels. We have asked for a similar hike in the prices of diesel to help oil marketing companies cut their under-recoveries,” a senior official said.

“Under-recoveries” is an oil industry jargon for fuel retailers having to sell their products below the cost of production.

“The empowered group of ministers (E-Gom) is slated to convene a meeting on Dec 22 on diesel prices. We have said that the oil marketing companies are losing around Rs.5.4 per litre on under-recoveries in diesel. A decision will be taken accordingly,” said a petroleum and natural gas ministry official.

Petroleum and Natural Gas Secretary S. Sundareshan has indicated that the entire burden of under-recoveries will not be passed on to the consumers.

Petroleum and Natural Gas Minister Murli Deora Tuesday said that the govenrment was looking at a “minimal” hike in diesel price. “E-Gom will take a view on this. We are trying to ensure that the price hike is minimal,” Deora told reporters.

The E-Gom meeting has been scheduled against the backdrop of a decision taken by the three state-run oil firms - Indian Oil, Bharat Petroleum and Hindustan Petroleum - to hike prices of petrol by up to Rs.3 per litre.

Mukherjee Wednesday said the state-run oil companies had to increase the petrol price due to a rise in the rates of crude in the international market.

“Petrol prices have been de-regulated and it has been decided that when the prices of the petrol would increase in the international market, the oil companies would adjust the prices,” he said.

“Now the price of petroleum crude has reached almost $90 per barrel (159 litres). So, prices have been increased (in India),” Mukherjee told mediapersons in Kolkata.

The last fuel hike was on June 25 when the government ended state control on pricing of petrol. It had also increased prices of diesel, cooking gas and kerosene at that time, while promising to eventually give up control on pricing of diesel as well.

The previous major hike saw petrol prices increase by Rs.3.5 per litre, diesel by Rs.2 per litre, kerosene by Rs.3 per litre and cooking gas by Rs.35 per cylinder.

The freedom to price petrol was left to the state-run oil marketing companies - a move that had met with vehement opposition from opposition parties.

Left parties have already warned they will protest intensely if the United Progressive Alliance (UPA) government allows a hike in fuel prices. Communist Party of India-Marxist politburo member Biman Bose asked citizens to be vocal in their protest against any “anti-people” decision.

Crude prices, which were in the range of $79 a barrel during June, have since soared to touch a two-year high of about $90 a barrel Tuesday, before settling around $88.5 per barrel.

In the process, oil marketing companies’ losses on account of under-recoveries, or for selling fuels below cost price, are expected to balloon further this year, unless the government allows them to raise prices.

Some earlier estimates had put the annual combined losses of these companies on under-recoveries around Rs.53,600 crore (nearly $12 billion) based on a crude price of $79 a barrel.

If prices are not revised, the three state-run oil retailers are likely to end the fiscal with a loss of close to Rs.67,000 crore (nearly $15 billion) on account of loss on sale of diesel, cooking gas and kerosene.

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