Prices of petrol and diesel will not be reduced immediately as oil companies continue to make losses even after the recent fall in international oil prices.
NEW DELHI: Petroleum prices may be coming down internationally but it may not translate into a cut in petrol bill. Petrol is priced about Rs 4 a litre higher than international prices, but considering that it constitutes only 8% of their total petroleum volumes, the companies are not ready to cut prices.
“Crude oil prices are hovering around $55-56 a barrel so there is a scope for reduction in some products like petrol,” petroleum minister Murli Deora said at the Economic Editors Conference.
He did not comment on whether there was any proposal in front of the ministry for cutting down the price.
“International prices have gone down but not to the extent that will warrant a price cut,” he added. The Indian basket of crude oil is now in the range of $56-58 a barrel, compared to about $67 a barrel when petrol price was raised by Rs 4 a litre and Rs 2 a litre for diesel, on June 5.
“At the current level of prices, the oil marketing companies are still incurring losses on diesel, kerosene and LPG,” he said.
If prices fell further, there could be some scope for a price cut, the Union petroleum minister said.
The petroleum minister said that decisions are also based on the futures market, though petroleum secretary MS Srinivasan said underrecovery figures were being worked out on the basis of fortnightly calculations of international prices.
“We do not want to decide on the prices on short term trends. The futures market predicts a price of $64 in January and $75 in June and so any reduction now will be premature and short-lived,” he said. A cut in petrol and diesel prices can be considered if international oil prices fall to $52 a barrel, he said.
Indian Oil Corporation chairman Sarthak Behuria said it was incurring a loss of Rs 50 crore a day on sale of all fuel products except petrol.
Official figures quoted for diesel are a loss of Rs 1.62 a litre. On kerosene, they were losing Rs 14.75 a litre and Rs 102 a LPG cylinder.
Petroleum Secretary MS Srinivasan said the loss on diesel, LPG and kerosene sale in November will be Rs 2,700 crore. He, however, said the corporation continues to lose Rs 1.50 per litre on the sale of diesel and Rs 12 a litre on kerosene. The company was also losing Rs 114 a cylinder of liquefied petroleum gas.
In recent weeks, particularly since mid-September 2006, the international prices of crude oil and petroleum products have softened.
The average price of Indian basket during October 1-10, 2006 is around $57.48 a barrel. This is due to the comfortable inventories position in the United States, drop in demand due to slow down of the US economy and easing of political tensions in the West Asia.
The ministry admits that the decrease in crude oil price augers well for developing countries like India, which procures about 78% of its crude oil requirements through imports. “However, the international oil prices still continue to be volatile and OPEC is considering cut in production of crude oil to prevent further decrease in crude oil price,” the ministry said.
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