New Delhi: Concerned over the impact of rising fuel subsidy on government finances, the finance ministry on Tuesday said the Empowered Group of Ministers (EGoM) will meet soon and take a decision on revision of fuel prices.
“EGoM will meet shortly. It (rationalisation of petroleum prices with international market) has become an important issue to grapple with. The Government will look into it very shortly,” economic affairs secretary R Gopalan said in New Delhi.
He said a decision on fuel price revision should be taken at the earliest.
“...whatever rationalisation (in fuel prices)...we have to take a decision as fast as we can because that is very important,” he said while talking to reporters on the sidelines of an OECD meet here.
Earlier in the day, oil minister S Jaipal Reddy met Prime Minister Manmohan Singh to push for an early decision on raising diesel and domestic LPG prices, as losses of oil firms are mounting with each passing day.
The EGoM, headed by finance minister Pranab Mukherjee, was scheduled to meet on 11 May, but was postponed. It has not met since June last year even though crude oil prices have spiralled by about 50%.
When asked the reason for the delay in meeting of the EGoM, Gopalan make an indirect reference to agitations by civil rights groups against corruption.
He said “you know the kind of other things which are happening in the country... rightly so they took the front stage. We are grappling with all the issues simultaneously now.”
When asked if the decision on revising fuel prices could be delayed as the overall inflation for the month has crossed 9%, the secretary said inflation has increased in the non-food manufacturing sector and there are separate instruments for handling that.
“But fuel, longer you delay (rationalisation of prices), greater the impact it will have on the way inflation will morph and then behave,” Gopalan said.
Higher subsidy bill, driven by rising crude prices in the international market, threaten to widen the fiscal deficit.
Gopalan said “we should look at how we can calibrate our fuel prices to reflect the international market reality.”
The oil ministry is pushing for Rs 3-4 per litre hike in diesel and Rs 20-25 per cylinder increase in LPG rates. Also, it is looking at a possible hike in kerosene prices.
Oil companies are losing Rs 14.22 on the sale of every litre of diesel at the current price of Rs 37.75 per litre in Delhi. In addition, state oil firms lose Rs 27.47 per litre of kerosene and Rs 381.14 per 14.2-kg domestic LPG cylinder.
The three firms may end the fiscal with a revenue loss of Rs 160,568 crore, at least half of which will have to be met by the government from its Budget.
The rates for the three products were last hiked in June, 2010, when crude was ruling at $72 per barrel. The basket of crude oil India buys averaged $110 a barrel this month.
State-owned oil firms had last month hiked petrol prices by a steep Rs 5 per litre and are looking at another small increase next week. Petrol prices were freed from government control in June last year and Indian Oil, Bharat Petroleum and Hindustan Petroleum have the freedom to fix retail rates.
On a query regarding restructuring of duties on petroleum products, Gopalan said the details were being worked out.