New Delhi: India will soon take a decision on raising diesel prices, oil secretary S Sundareshan said on Wednesday, a move that would lower the government’s subsidy bill and boost the financial health of oil marketing firms.
India ended state controls on pricing of petrol in June and raised prices of diesel, cooking gas and kerosene. It also promised to eventually end the curbs on diesel prices.
Oil marketing companies were losing Rs4.80 in revenue for every litre of diesel sold as global crude oil prices touched $90 a barrel on Tuesday, Sundareshan said.
“It (global crude oil price) shows no sign of abating so government has to take a view on this ... we think they should take a decision as quickly as possible,” he told reporters.
The Economic Times reported on Wednesday state-run oil marketing companies were planning to raise petrol and diesel prices by Rs2 a litre.
Sundareshan did not comment on the likely increase in the prices of diesel, which is a political hot potato in India as it accounts for a third of the country’s oil demand, and a rise in prices can stoke inflation pressures in the economy.
However, uncertainty over diesel pricing and how subsidies are split between companies and the government could deter investors from the planned sale of shares in state-run Indian Oil Corp and Oil and Natural Gas Corp, analysts said.
Oil marketing companies Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are expected to suffer a revenue loss of about Rs65,000 crore in the current fiscal on sale fuel at cheaper rates, Sundareshan said.
The oil secretary reiterated the government has no immediate plants to deregulate diesel pricing.
“What does diesel deregulation means at this juncture,” he said. “It means that entire burden be passed on to the consumer which I think is impossible because it will be a sudden increase.”
He added: “The consumer has to be prepared to share a part of the burden.”
World oil prices, which eased as much as 1.2% on Wednesday, are likely to stay high, Sundareshan said.
“Considering the severe winter in Europe (and) the festive season increase in demand, there is every apprehension that the crude oil prices will remain high or it may even go up,” he said.
Separately, the secretary said there was no proposal under consideration to give a fixed-rate of return to explorer ONGC on its investment in oil blocks in Rajasthan, operated by Cairn India.