Price hike in auto fuels unlikely

The government has as good as ruled out a hike in the prices of petrol and diesel “in view of the upcoming state elections”, even as crude oil prices hover tantalisingly close to the psychologically important $100 per barrel mark.

The oil ministry is instead considering additional issue of oil bonds to compensate the government-owned oil marketing companies, which are together losing around Rs 240 crore per day from selling petrol, diesel, LPG and kerosene at subsidised prices, a senior official in the petroleum ministry said.

Petroleum Minister Murli Deora told Business Standard late last week that the government had four options in order to offset the adverse affect of surging crude oil prices on the oil marketing companies — provide more oil bonds to the marketing companies, hike prices in petrol and diesel, cut excise duty on petroleum products and reduce import duties on crude oil.

The ministry official said that import duty on crude oil was also unlikely to be reduced. “The finance ministry is not in favour of it,” the official said.

The official also added the excise duty cut on petroleum products was a state subject and “we can at the most request state governments to consider it”.

Deora had said last week that a decision on oil prices would be taken in the next one week, a statement he reiterated today.

The government has agreed to bear 42.7 per cent of the total retail revenue loss of the three oil marketing companies during the year.

“If the revenue loss is higher than the current estimate of around Rs 54,900 crore for the year, we will have to increase the value of the bonds we give to the marketing companies,” the official said.

He added that if oil prices remained at the current level of close to $95 per barrel, the retail revenue losses for the entire financial year would be around Rs 60,000 crore.

Deora had met Prime Minister Manmohan Singh, Congress chief Sonia Gandhi and Finance Minister P Chidambaram last week, seeking relief from the high crude oil prices.

He had said that a decision on the oil prices would be finalised within a week. “There has been no official paperwork other than keeping the Cabinet informed on the global oil price movement,” the official said.

The Cabinet had earlier agreed to give the three oil companies — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation — Rs 23,458 crore in the current financial year.