Govt hikes petrol, diesel prices

The government today hiked the price of petrol by Rs 2 per litre and diesel by Re 1 per litre from midnight tonight to curb losses of public sector oil companies.

The decision will benefit domestic oil companies, whose total under-recoveries this year is estimated at around Rs 71,808 crore, by Rs 840 crore.

"We tried our best not to raise fuel prices, but with global crude oil prices touching $100 per barrel in early January, it was impossible for the oil marketing companies to bear the burden of losses," Petroleum Minister Murli Deora said.

The government, however, has decided not to cut taxes on petrol and diesel - a move demanded by the Left parties. In Delhi, taxes make up almost 52% of the cost of petrol and 32% of the cost of diesel.

The Cabinet Committee on Political Affairs today also decided that 57% of the projected annual Rs 71,000 crore retail loss for the oil marketing companies would be borne by the government through issue of oil bonds. This is up from 42.7% the cabinet had cleared in June last year.

"The real benefit from this price hike will be next year. In the 12 months of the next financial year, it will make up around 10% of the total under-recoveries," Petroleum Secretary M S Srinivasan said.

GoM to review prices of all petro products

It is not only petrol and diesel prices that will be "reviewed" at the meeting of the Group of Ministers (GoM) on Thursday. The prices of two other subsidised commodities -- kerosene and LPG -- will also be reviewed, Petroleum Minister Murli Deora said today.

This would be the first meeting of the GoM convened in November last year. "On January 17, the GoM meeting under the chairmanship of Pranab Mukherjee is taking place in Delhi. That time, it (price hike) will be decided," Deora said.

Deora was talking to reporters after inaugurating the 7th international conference and exposition of Society of Petroleum Geophysicists here.

"What is left to decide is the quantum of the increase," Petroleum Secretary M S Srininvasn said in response to a question on whether a price hike is inevitable.

With crude oil prices at record highs, the three government-owned oil marketing companies -- Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum -- are losing as much as Rs 320 crore a day by selling subsidised products. They have therefore been lobbying for a price hike. There is, however, no political consensus on such a move.

The government also has the option of reducing import duties on crude oil and sales tax on petroleum products and avert a hike.

A statement issued by CPI (M), a key ally of the government, which is opposed to a price hike, said: "It is estimated that the central government has collected Rs 40,000 crore more than the budget estimates through ad valorem taxes. If this amount is returned to the oil companies, the necessity of increasing the prices of petroleum products would not arise."

Govt prepares for Rs 2 a litre petrol price hike

The government is preparing the ground for an increase in the prices of petrol and diesel in February to partly cushion losses, projected at Rs 70,000 crore this fiscal, which oil marketing companies make from selling fuel below cost against steadily rising crude oil prices.

The proposed price increase, the first in 18 months, is likely to be in the range of Rs 2 per litre for petrol and Re 1 per litre for diesel, senior petroleum ministry officials said.

Prices of kerosene and domestic LPG are unlikely to be raised, an oil ministry official said.

Petroleum Secretary MS Srinivasan had on Wednesday said that petrol prices were likely to be increased by Rs 4 per litre and diesel by Rs 2 per litre as news agencies reported today.

“The Rs 4 hike in petrol prices may be too steep, considering there are the Left parties to deal with. It will probably be Rs 2 for petrol and Re 1 for diesel,” confirmed a top petroleum ministry official.