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The government may allow a hike in petrol, diesel and cooking gas (LPG) prices after the Budget session of Parliament.
Giving an indication in this regard, Union Finance Minister Pranb Mukherjee told the Rajya Sabha on Wednesday, “Petroleum prices are increasing by leaps and bounds. We cannot keep them under any carpet. If we do not take corrective measures, we will have to face disastrous consequences.”
With losses on sale of petrol climbing to over Rs 7 a litre, state-owned oil firms have asked the government to either provide subsidy on the fuel or reduce excise duty.
The current retail selling price of Rs 65.64 per litre in Delhi is short of actual cost by Rs 8.60 a litre.
There is an under recovery of Rs 7.17 per litre on sale of petrol. After adding 20 percent local sales tax or VAT, the desired increase in petrol price comes to Rs 8.60 per litre.
In order to mitigate losses on sale of petrol, oil marketing companies have, inter alia, suggested to the government to either declare petrol as a ‘regulated’ product temporarily and provide cash compensation (subsidy) for under- recovery or to reduce the excise duty on petrol from Rs 14.78 per litre by an amount equivalent to the under-recovery on petrol.
The government had freed pricing of petrol from its controls in June 2010 but rarely have the fuel rates moved in tandem with cost.
Petrol price were last revised on 1 December when the imported cost of the fuel was USD 109.30 a barrel. Since then global rates have climbed to about USD 120 per barrel.
At the last revision, oil firms cut rates by Rs 0.65 a litre on top of an earlier price reduction of Rs 1.85 per litre effected from 16 November 2011.
Oil firms had lost Rs 4,859 crore on selling petrol below cost in 2011-12 fiscal. This was over and above Rs 138,541 crore they lost on selling diesel, domestic LPG and kerosene below market price in the fiscal.
The public sector oil marketing companies have incurred under-recovery (revenue loss) of Rs 138,541 crore during 2011-12, which is 77 percent more than the under-recovery of Rs 78,190 crore for 2010-11.
Of the total under-recovery, the government has so far provided only Rs 45,000 crore in cash subsidy, adding in 2010-11, the government gave cash subsidy of Rs 41,000 crore or 52 percent of the under-recovery.
