New Delhi: Government will roll back the Rs4 a litre hike in petrol prices and Rs2 a litre increase in diesel rates if international crude oil prices stabilise between $50 and 60 a barrel, Oil minister Murli Deora said.
“Yes, we will cut prices if crude prices stabilise for sometime between $50 and 60 per barrel,” he said here.
The government had last week raised petrol and diesel prices citing spike in international crude oil prices to $70 a barrel.
International rates have eased since. The basket of crude oil India buys was at $61.58 a barrel on Wednesday but the average for July was $65.34 per barrel. The July average was certainly lower than $69.12 a barrel average price of Indian basket of crude for June.
Deora said the price rise was unavoidable as India was dependent on imported crude oil to meet 75% of its domestic oil needs. Indian Oil, Bharat Petroleum and Hindustan Petroleum were projected to lose Rs4,870 crore in revenues every month on selling petrol, diesel, domestic LPG and kerosene below the cost.
“To cover this (revenue loss), the retail prices were required to be increased by Rs6.94 per litre on petrol, Rs4.11 a litre on diesel, Rs96.68 per LPG cylinder and Rs16.01 per litre on kerosene,” Deora said. “However, the government increased the price of petrol only by Rs4 per litre and of diesel by Rs2 a litre.”
As a result of keeping retail prices below cost, the cash flows of three oil marketing companies (OMCs) were affected, compelling them to borrow heavily to meet their cash flow requirements, Deora said.
“OMCs’ borrowings ballooned to Rs107,115 crore on December 31, 2008, before falling to Rs88,900 crore in March 2009, consequent to the fall in international oil prices and issue/liquidation of oil bonds,” the minister added.
During 2008-09, the OMCs’ interest burden increased to Rs8,201 crore as against Rs3,016 crore during the previous year, making a serious dent on their profitability.
In the same year, even after ensuring full compensation for their revenue loss on fuel sales (upstream assistance of Rs32,000 crore and oil bonds of Rs71,292 crore) the three public sector OMCs barely escaped going into losses, he said.