Diesel prices may be hiked by Rs 10 per litre over a 10-month period and kerosene rates increased by same quantum over the next two years if a proposal being mulled in the Oil Ministry is accepted.
The price hike is being considered as the government scrambles to find ways to meet an unprecedented Rs1,60,000 crore deficit expected this fiscal on selling diesel, cooking gas (LPG) and kerosene below their production cost.
Diesel which currently costs Rs47.15 per litre in Delhi was last revised on September 14 when it was hiked by a steep Rs5.63 per litre. Kerosene rates have not changed since June last year and it currently costs Rs14.79 per litre in Delhi. "We are left with no choices... there is a need to raise prices. The government is contemplating raising diesel prices by Re one per litre each month for next 10 months to bring retail rates at par with their cost," an oil ministry source said here.
State-owned oil companies currently sell diesel at a loss of Rs 9.28 per litre and the hikes over the next 10 months will eliminate all of the losses and absolve the government from providing any subsidy on the nation's most consumed fuel. The source said price of kerosene could be increased by Rs10 over a two-year period considering it is being used as a cooking fuel by the poor. The price hike along with promoting use of LPG and natural gas as fuel would help cut consumption of the kerosene by 20%, he said.
While government is likely to raise soon the number of subsidised cooking gas (LPG) from 6 to 9 cylinder of 14.2-kg per household annually, the ministry wanted to have just two rates for the fuel -- a subsidised price and a market rate, instead of four rates presently, he said.
Subsidised LPG costs Rs410.50 per 14.2-kg cylinder and any household requirement beyond current cap of 6 cylinders is to be bought at near market price of Rs895.50 per bottle. For non-domestic use, a 14.2-kg LPG cylinder costs Rs1,156 while a 19-kg cylinder for commercial use is priced at Rs1,619.
The source said state-owned Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp together in first six months of current fiscal lost Rs85,586 crore on selling diesel, domestic LPG and kerosene at government-controlled rates which are way below their cost. Of this, the bulk Rs52,711 crore was on account of losses on diesel.
The government has promised a cash support of Rs30,000 crore to cover a part of the Rs85,586 crore revenue loss on fuel sales during April-September. Upstream oil firms like ONGC have chipped in Rs 30,170 crore, leaving a balance Rs25,417 crore uncovered, he said.
The oil ministry, he said, wants finance ministry to make up for this shortfall as well as the revenue deficit expected in the remaining six months of current fiscal.
In all, the oil ministry has sought Rs105,525 crore from the finance ministry this fiscal to subsidise diesel and cooking fuel. State-owned fuel retailers are likely to end the fiscal with a revenue loss of over Rs1,63,000 crore on sale of diesel, domestic cooking gas (LPG) and kerosene at government- controlled rates that are way lower than cost.
Of this, close to Rs60,000 crore will come from upstream companies Oil and Natural Gas Corp (ONGC), Oil India Ltd and GAIL India. For the rest, the Oil Ministry has asked the Finance Ministry to give cash subsidy.