The panel will consider raising petrol and diesel prices by Rs 2-4 per litre, even as the government's key allies Mamata Banerjee and Sharad Pawar appear opposed to a fuel price hike.
A ministerial panel will on Friday consider raising petrol and diesel prices by Rs 2-4 per litre, even as the government's key allies TMC's Mamata Banerjee and NCP supremo Sharad Pawar appear opposed to a fuel price hike.
The eight-member Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee will for the second time this month meet on June 25 to consider freeing petrol and diesel prices from government control.
"Friday is the meeting of EGoM," oil minister Murli Deora said but declined to elaborate on the agenda before the EGoM.
Banerjee and Pawar had abstained from the panel's first meeting on June 7, leading to postponment of a decision.
Sources said with DMK leader and fertilizer minister MK Alagiri on-board, the EGoM may push for freeing petrol prices, a move that will see rates in Delhi rising by Rs 3.73 a litre. Petrol in Delhi currently costs Rs 47.93 per litre.
A similar decision on diesel would have resulted in rates going up by Rs 3.80 per litre but Banerjee and Pawar remain opposed to any increase in prices of a fuel that is used by transport and agriculture sector and has inflationary impact.
With global crude oil trading below $80 a barrel, Deora sees this as the last opportunity to usher in reforms in the sector which otherwise would need Rs 74,300 crore in doles to bridge the gap between retail prices and the imported cost.
In absence of a consensus on freeing diesel prices, the oil ministry may push for a minimum Rs 2 per litre increase in
rates, sources said.
Freeing of petrol prices would reduce the Rs 74,300 crore deficit by about Rs 5,000 crore. A one rupee per litre hike in diesel prices would cut the losses by Rs 3,800-4,000 crore.
Deora, who has on more than one occasion briefed the prime minister Manmohan Singh and EGoM head Mukherjee on the crisis that stares oil PSUs if no decision was taken, had twice tried for EGoM to meet last week but failed due to unavailability of ministers.
While there may not be any problem in freeing pricing of petrol, there were doubts about raising diesel prices that many feel would add to the already high inflation.
In May, WPI-based inflation provisionally entered double digits at 10.16%.
Sources said also on cards was a Rs 25 per cylinder hike in domestic LPG rates but it too has to pass the muster of Banerjee and Pawar.
State oil firms currently lose about Rs 215 crore per day on selling fuel below imported cost. They lose Rs Rs 3.73 a litre on selling petrol, Rs 3.80 per litre on diesel, Rs 18.82 a litre on PDS kerosene and Rs 261.90 on every 14.2-kg LPG cylinder.
Asked about the opposition to price hike by key allies, petroleum secretary S Sundareshan said: "These are political decisions. I have nothing to say on this."
Sources said his ministry may push for freeing petrol price from government control and possibly give limited autonomy to state oil firms to price diesel closer to market rates.
Petrol price will go up Rs 3.73 a litre on aligning the domestic prices with international rates. In case of diesel, the proposal is to give oil firms freedom to price the auto fuel only till such time that international crude oil rates stay below $90 per barrel.
If accepted, diesel rates will rise by Rs 3.80 per litre immediately.
Sources said domestic retail prices are benchmarked at close to $60 per barrel crude oil price while the global rates currently are over $74 a barrel.
If the crude climbs to $90 per barrel, diesel price in Delhi would have risen by over Rs 7 per liter over the current selling price of Rs 38.10 a litre.
The government would step in if crude oil crosses $90 and diesel prices would be moderated either through cut in excise and customs duty or through subsidy from exchequer.
Petrol in Delhi currently costs Rs 47.93 per litre.
The EGoM, at the first meeting, had gone into the report of the expert group headed by Kirit Parikh that called for freeing petrol and diesel prices and a steep Rs 100 per cylinder hike in LPG rates and a Rs 6 per litre increase in kerosene prices.
The oil ministry made a presentation on the impact of the Parikh committee's recommendation, projecting a revenue loss of Rs 74,300 crore to state oil firms if petrol, diesel, domestic LPG and kerosene continue to be sold at rates below the imported cost.
The EGoM also discussed the impact of implementing the committee's report on inflation, sources said, adding that
freeing auto fuel prices would lead to a 1.4% rise in the Wholesale Price Index (WPI).
State-owned Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum currently lose about Rs 215 crore per day on selling fuel below imported cost. They currently sell petrol at a loss of Rs 3.73 a litre, while the under-recovery is Rs 3.80 per litre of diesel, Rs 18.82 per litre of PDS kerosene and Rs 261.90 on every 14.2-kg LPG cylinder.
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