Oil price hike unlikely this week

May 26th, 2008 - 11:43 pm ICT by admin  

New Delhi, May 26 (IANS) While countries across Asia have hiked their domestic fuel prices in tune with the record global oil surge, the Indian government is unlikely to take the politically sensitive decision this week. A senior oil ministry official Monday indicated that there was “no political consensus” on raising fuel prices.

“Ministries are ready but politicians are not (prepared to raise prices),” he added.

The oil companies have been clamouring for a price increase, as they have to face the brunt of the subsidized rate at which the government sells transport fuel.

Indonesia has already raised its fule prices by over 28 percent, while Sri Lanka hiked by 14 to 47 percent Sunday. Bangladesh has indicated that it could raise the cost of certain fuels by nearly 80 percent.

In India, the security deposit for new cooking gas connections has been increased by Rs.400 to Rs.1,250 by Indian Oil, Hindustan Petroleum and Bharat Petroleum. The deposit has been increased due to the spiralling cost of the steel used for the gas cylinders.

But uncertainty remains on the government’s policy for oil prices. Petroleum Minister Murli Deora Friday said a decision was likely to be taken within a week, and the Petroleum Secretary M.S. Srinivasan said a price rise was “inevitable”.

In a statement released last Thursday after global oil prices reached a high of $135.09 a barrel, Deora said he was “concerned at the financial health of the PSUs”.

“The government and oil PSUs have shouldered the maximum burden of the highly volatile world oil prices, insulating consumers in India from most of the impact,” he had said.

According to the petroleum and natural gas ministry, petrol was being sold at a loss of Rs.16.34 a litre, diesel at Rs.23.49 per litre, LPG at Rs.305.90 per cylinder of about 14 kg, and kerosene at a discount of Rs.28.72 per litre.

The central government currently issues bonds for 42.7 percent of the oil firms’ losses, with another 33 percent coming from upstream oil companies.

The petroleum ministry had sought the issuing of oil bonds worth Rs.440 billion, amounting to 57.1 percent of the Rs.770 billion losses incurred by the state-run oil marketing companies during 2007-08. But the finance ministry has so far rejected the proposal.

According to official sources, the government may be keeping any decision to raise prices in abeyance while inflation remains at a high of nearly eight percent.

The government is likely to take a combination of actions to tackle the problem, which include raising fuel prices, issuing oil bonds and cutting customs and duties on fuel.

The central government last hiked fuel prices in February when it raised petrol price by Rs.2 and that of diesel by Re.1.

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