Ministerial panel meets to decide on petrol, diesel price hike; Mamata Banerjee skips meet

An Empowered Group of Ministers headed by finance minister Pranab Mukherjee today met for the second time in less than three weeks to decide on raising fuel prices, but railway minister Mamata Banerjee was absent again.

Banerjee and agriculture minister Sharad Pawar had abstained from the first meeting of the eight-member EGoM on June 7 that was to decide if petrol and diesel prices can be freed from government control, along with hikes in domestic LPG and kerosene rates.

Their absence then was attributed to opposition to increase in rates of diesel and cooking fuel and the EGoM postponed a decision.

While Pawar was part of today's meeting, Planning Commission deputy chairman Montek Singh Ahluwalia and transport minister Kamal Nath were absent as they are away on official visit.

Oil minister Murli Deora, power minister Sushilkumar
Shinde and DMK leader and fertiliser minister M K Alagiri were
present.

Banerjee late last evening met Mukherjee ostensibly to discuss the imperatives of fuel price hike. Some say she may have informally agreed for a hike in petrol prices and her absence from the EGoM today may be to serve her political goals in West Bengal by remaining disassociated with the decision.

Sources said the panel may go with Deora's proposal to free petrol prices from government control, which would trigger a hike of Rs 3.73 a litre. 

There was near-unanimity on bringing about market-linked prices for petrol, a fuel generally used by the well-off, but it remains to be seen if the Rs 3.73 per litre hike would come into effect immediately or in two equal installments. 

However, sources said that freeing diesel prices was out of the question because the fuel was used by the transport and agriculture sector and, therefore, would have an impact on the
already high inflation rate.

The EGoM may settle for a Rs 2 per litre hike in diesel rates instead of the Rs 3.80 hike needed to make it market-linked, they said.

Also on the cards is a Rs 25 per cylinder hike in domestic LPG rates and a marginal increase in kerosene prices, but these would have to pass the muster of Banerjee and Pawar. 

Sources said that Alagiri who had attended the last EGoM, was agreable for an increase in auto fuel prices.

With global crude oil trading at below $80 a barrel, Deora is seeing 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 import costs.

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 losses by Rs 3,800-4,000 crore.