New Delhi: Even as the government continues to send out mixed signals on the decision to raise prices of transport and cooking fuel, the country’s state-owned oil marketing companies have raised the pitch of their efforts to secure an increase in prices by saying their supplies to the army could be hit if this isn’t done soon.
Mint had reported on 29 May that these oil marketing companies which sell fuel at a government-mandated subsidized price, thereby incurring huge losses, were addressing the crisis brought about by the soaring price of crude by cutting back supplies in parts of the country.
/Content/Videos/2008-06-03/030608Anil on Omc.flv
“We cannot negate the possibility that if the current situation persists, the crisis will not affect the requirements of the Indian Army. It is very unfortunate,” said a senior government official who did not wish to be identified.
The Indian Army consumes a little less than half a million tonnes of petroleum products a year, 94% of which is supplied by Indian Oil Corp., or IOC, the country’s largest oil marketing firm.
This demand is expected to increase on the back of increased troop movement necessitated by more anti-terror operations in various parts of the country.
A senior executive at IOC, who did not wish to be identified due to the sensitive nature of the issue, said: “As of today, there is no crisis (for the army) but if the bail-out package is not announced shortly, we cannot rule out anything.”
Restricting sales: Indian Oil Corp. chairman and MD Sarthak Behuria. ( Ashesh Shah / Mint)
Defence ministry spokesman Sitanshu Kar could not be reached for comment.
IOC and Bharat Petroleum Corp. Ltd have started restricting supply to dealers who retail their products and Hindustan Petroleum Corp. Ltd is set to follow suit this week.
“We have restricted our sales subject to availability. The market will have to feel the pinch for diesel and petrol. There will be pressure in some parts of the country over the next few weeks. We have seen this kind of crisis in the (19) 80s and the ’90s. I am not saying there will be a dry-out. However, there would be a panic situation,” Sarthak Behuria, chairman and managing director of IOC, said last week.
The United Progressive Alliance government’s policy of getting state-owned oil marketers to sell fuel at a price lower than ths cost of production is expected to result in losses of Rs2 trillion for such firms in 2008-09.
The government may decide on a marginal increase in fuel prices by Rs2 per litre on diesel and Rs4 per litre on petrol, accompanied by a reduction in the customs duty on crude oil by half to 2.5%, and on diesel and petrol by a third to 5%.
The government is in a bind over increasing fuel prices because political parties supporting the coalition government at the Centre are strongly opposed to any increase in prices.
(K.P. Narayana Kumar contributed to this story.)