Fill it, shut it and forget it. Set aside worries of an impending hike in auto fuel prices and of costlier cooking gas.
Ram Setu, nuclear deal add to oil marketer’s woes
NEW DELHI: Fill it, shut it and forget it. Set aside worries of an impending hike in auto fuel prices and of costlier cooking gas.
While global oil prices climbed record high this week pushing the benchmark Indian basket to the year’s high of $76.13 a barrel, the troubled UPA coalition at the Centre abandoned thoughts of raising fuel prices and withdrawing the subsidy on cooking gas for the non-poor.
The Indian basket comprises Oman-Dubai sour grade and Brent dated sweet crude in a 60:40 ratio.
It is the government-owned oil companies that will bear the brunt of Rs 5.75 a litre loss on sale of diesel, Rs 3.35 on petrol and Rs 15.47 on kerosene and Rs 174.75 on every cylinder of LPG.
The petroleum ministry had earlier this month, through a status report meant for the Prime Minister and Cabinet, drawn the government’s attention to domestic oil marketing companies losing heavily because of the growing mismatch between global and domestic fuel prices. However, petroleum minister Murli Deora has ruled out any hike in domestic fuel prices.
A senior government functionary said the government is struggling with the difficult task of political management over the Indo-US nuclear deal and the Ram Setu row.
“It has little political capital to expend on taking the hard and potentially unpopular decisions of increasing fuel prices.”
More than the price hike, it is the lack of political will to issue oil bonds to the companies for compensating losses is what is disturbing their investment plans.
“Normally, the administrative ministry pushes the case of petroleum companies for a hike when it sees they are going in red but the response of petroleum ministry is timid though it is well known now that oil marketing companies Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum may close the second quarter with losses,” said a senior official.
Government sources said the petroleum ministry has been told that hike in consumer prices of petroleum products is not a viable option in the current political situation facing the government but at the same time no alternative mechanism has been worked out.
Parliament’s monsoon session ended without the government getting approval for oil bonds to compensate for around Rs 50,400 crore annualised losses.
“Fuel price hike is a difficult political task at most times. It is more so now,” said a minister engaged with the current trouble-shooting efforts with the government’s Left allies on the nuclear issue.
Decisions such as hiking the prices of petrol and diesel and cutting subsidies on cooking gas would require consultations with not only the Left parties, which are bound to see red, but also within the UPA coalition. UPA constituents including RJD and DMK are not in favour of any increase in fuel prices now.
“With inflation staying below 4% for the latest four weeks, there was perhaps a window of opportunity to pass on to the consumer a little bit of the burden of the global oil price increase,” said a finance ministry official, “but clearly the government is politically not in a position to bite the bullet. It has no appetite for opening another front (of confrontation within the ruling coalition),” he said.
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