New Delhi: In a clear indication of an imminent fuel price hike, Prime Minister Manmohan Singh has said that the consumers cannot be fully insulated from the impact of rising international oil prices, even though a consensus eludes the government on the issue.
With the surge in global oil prices leaving a Rs225,040 crore revenue deficit with oil companies, Singh has over the past one week held several rounds of consultations with senior ministers and UPA Chairperson Sonia Gandhi on raising fuel prices.
“We cannot allow the subsidy bill to rise any further. Nor do we have the margin to fully insulate the consumer from the impact of world commodity and oil price inflation,” the Prime Minister said at Assocham’s annual meeting.
Petroleum Minister Murli Deora, who has been pushing for a Rs10 a litre hike in petrol, Rs5 per litre increase in diesel and Rs50 per cylinder raise in LPG prices, readied a note for consideration of the Cabinet.
“There is no consensus on the issue and therefore they (the government) is buying time,” one of Deora’s aide said.
Prime Minister also talked of building wider political consensus on the issue saying the government could insulate poor people “up to a point” and economic pricing of oil was essential to sustain growth.
The recent reverses suffered by the ruling Congress in Karnataka Assembly elections and inflation rate climbing up to 45-month high of 8.1%, are underpinning government’s willingness to take drastic measures.
Finance Minister P Chidambaram has vehemently opposed to a duty cut to cushion the impact of global prices. He is also not in favour of raising prices as it may fuel inflation.
At current global oil prices, India’s oil subsidy bill may shoot up three times to 2.2% of the GDP this year.
State-run fuel retailers Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation face a revenue loss of Rs225,040 crore on sale of petrol, diesel, domestic LPG and kerosene this fiscal on not being allowed to align retail prices with cost.
BPCL and HPCL would run out of cash to even import crude oil in July, while IOC can sustain imports till September.
Sources said the government’s reluctance to take a decision on the issue has this month seen widening of losses of state-run companies on fuel sales to Rs 650 crore per day from Rs 580 crore of last week.
The three firms, who till last week were losing Rs16.34 a litre on petrol, are incurring a loss of Rs21.43 on sale of every litre since 1 June.
Similarly, the losses on diesel have widened to Rs31.58 per litre from Rs23.47 while on kerosene they have jumped to Rs35.98 from Rs28.72 per litre. Losses on LPG have swelled to Rs353 per cylinder from Rs305.90.
There is likelihood that a meeting of the Cabinet may take place this week to decide on the fiscal package that may include raising fuel prices and marginal duty cuts.
The basket of crude oil India buys averaged $124.02 per barrel in the second fortnight of May as against $115.09 in the first fortnight. The Indian basket was at $67 per barrel in February when petrol and diesel price were raised by Rs2 and Re1 a litre respectively.