New Delhi/ Mumbai: The Union government may decide to raise prices of auto fuels by the end of January, for the first time in 18 months, to lower the burden of record crude prices on state-run refiners.
All options, including a price increase and a cut in duties on fuels, will be considered to help the refiners who sell fuels below cost, petroleum minister Murli Deora said. Deora said he is in talks with the Communist allies to seek their approval for raising prices.
Crude oil traded near a record in New York after reaching $100 (Rs3,940) a barrel for the first time on Wednesday on concern that violence in Nigeria may further cut output in Africa’s biggest producer. The rise has strained finances at Indian Oil Corp. (IOC) and its counterparts that are forced to sell petrol, cooking oil and diesel at below-market prices.
“India needs to tighten its belt,” Deora said. “The country is concerned because of the increase in oil prices.”
Shares of IOC, the nation’s biggest refiner, and its state-run counterparts, surged.
Inflation in India has held below the central bank’s 5% target for five months as the government subsidized fuel to protect consumers. Inflation may rise if the government lifts the cap on retail prices, the Reserve Bank of India had said on 27 November.
The refiners may lose as much as Rs70,000 crore because of fuel sales at lower than market rates, M.S. Srinivasan, secretary to the oil ministry, had said on 10 December.
IOC is losing the equivalent of $43 million every day by selling petrol, diesel and cooking fuel below market prices, P.K. Goyal, IOC’s executive director for finance, said in New Delhi on Thursday.
“The price hike should have come a long time ago,” said Anjan Ghosh, who covers energy for Icra Ltd, an affiliate of Moody’s Investors Service. “There’s a limit to how many oil bonds the government can issue to refiners and how much burden oil producers can take.”