New Delhi: The government’s move to further cut fuel prices has been opposed by some sections of the government, which say this should only be done if retail prices are linked to global crude costs.
Currently, local fuel prices are administered and state-owned oil marketers take a hit if crude oil prices are higher. The government subsidizes the firms by issuing oil bonds.
Opponents say that further cuts should be made only if retail prices are linked to global crude costs Indranil Bhoumik / Mint
A panel chaired by B.K. Chaturvedi, former cabinet secretary and member of the Planning Commission, has recommended monthly revisions in prices to bring local prices at par with international ones.
“It is (also) my view and the view of the Planning Commission. When it comes to the cabinet, we will take a view on this,” said Planning Commission deputy chairman Montek Singh Ahluwalia. He declined to elaborate.
Petroleum minister Murli Deora said in Mumbai on 10 January that petrol, diesel and LPG (liquefied petroleum gas) prices could be reduced by Rs5 a litre, Rs3 a litre and Rs25 a cylinder, respectively. The government had reduced the prices of petrol and diesel by Rs5 per litre and Rs2 per litre, respectively, on 5 December.
The proposal comes after international crude prices have dropped to around $36 per barrel (Rs1,749.6) after touching a record of nearly $147 per barrel.
The decision, which appears to be populist ahead of the general election due by May, could come with an excise duty rejig, adding Re1 to the price of petrol and diesel. The excise on petrol and diesel is currently 2.5%.
Mint could not independently confirm this. While petroleum secretary R.S. Pandey is on an overseas visit, S. Sundareshan, additional secretary in the oil ministry, declined to comment.
In a related development, P. Raghavendran, president of Reliance Industries Ltd’s refinery business asked the government to free retail fuel pricing and enable a level playing field between private companies and government-owned oil marketers such as Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd.
If the government decides to align local and international oil prices, it would provide much respite to private oil marketing companies such as Reliance and Essar Oil Ltd.
While India’s public sector oil marking companies earn Rs11.99 on the sale of per litre of petrol, and Rs4.13 per litre of diesel, they lose Rs12.16 per litre of kerosene and Rs132.97 on each LPG cylinder.
As a result, despite the sharp fall in crude oil prices, these firms are still losing Rs50 crore a day and expected to end 2008-09 with losses of Rs1.09 trillion.