Govt Shuns Inflammable Fuel Price Hike

NEW DELHI: Call it the Sonia effect. Even as crude oil prices are raring to touch the $100 mark, retail fuel consumers in the country will continue to buy fuel at highly-subsidised rates, at least for the time being.

Petroleum minister Murli Deora, who met UPA chairperson Sonia Gandhi on the issue, has ruled out an immediate price hike and said the government would ‘explore every possible option’ to bail out the oil companies.

“Yes, I have met Ms Gandhi to appraise her of the situation,” he told ET. He said the government is concerned about rising crude prices in the international market and its adverse impact on the oil companies. He, however, declined to comment on the probable action.

The government is exploring all options including raising the value of the oil bonds and an excise duty reduction. Some officials are even in favour of marginally raising retail prices of fuel. “However, a final decision would emerge only after consulting both PMO and the finance ministry.

After all, pricing of petroleum products is politically sensitive,” an official said. Political sensitivity is even higher at the moment due to forthcoming assembly elections in Gujarat.

A senior official in the petroleum ministry, however, ruled out a price hike in near future. “There is no formal proposal from the ministry to increase retail prices of petrol and diesel,” he said.

The government last month decided not to raise fuel prices this fiscal despite rise in cost of production due to higher international crude oil prices. Instead, it devised a package to take care of two-third of the Rs 55,000-crore revenue loss to oil PSUs. However, with global crude prices crossing $96 per barrel, the compensation might be considered inadequate.

On October 11, the Cabinet decided to give oil bonds to IOC, HPCL and BPCL to the extent of 42.7% of Rs 54,935 crore — their projected revenue loss in the fiscal — for not increasing prices of petrol, diesel, domestic LPG and PDS kerosene. Besides giving oil bonds worth Rs 23,457 crore, 35% of Rs 19,227 crore of the total under-realisation in revenue is to be borne by upstream firms ONGC, Gail and OIL. The remaining amount of under-recovery is to be borne by IOC, BPCL and HPCL.

If crude prices in the international market remain above $90 per barrel for the rest of the year, it would result in a revenue loss of Rs 70,000 crore for public sector oil marketing companies. On November 1, Brent crude price was $90.87 per barrel whereas crude price of the Indian basket soared to an all-time high of $87.85 per barrel. The Indian basket is a mix of Dubai, Oman, Brent and WTI crude.