Top India officials to meet again on oil price surge

Top India officials to meet again on oil price surge

By Reuters

New Delhi: India’s oil minister will meet top leaders for a second day on 2 November to discuss how best to stem losses at state-run oil firms caused by a surge in global oil prices, a senior oil ministry official said.

Murli Deora will meet Prime Minister Manmohan Singh and the leader of the ruling Congress party, Sonia Gandhi, in the evening and is likely to suggest duty changes or a price hike.

Analysts say important state elections due in December, opposition from communist allies to a nuclear deal with the U.S., and the implications for inflation will make officials think twice before increasing prices.

“We are trying to resolve the situation arising out of an unprecedented, sudden increase in global crude oil prices," the official told reporters on 2 November.

The government is yet to raise state-administered retail fuel prices this year even though global oil prices have risen above $90 a barrel in recent weeks. Indian oil companies are required to sell petroleum products at government-set, discounted rates to protect consumers and reduce inflation.

The government then issues oil bonds to oil companies to partially offset their losses from selling fuel below market rates. But with crude topping $96 a barrel on 1 November for the first time, countries such as India that sell gasoline, diesel and other consumer fuels at below costs are feeling the heat.

Deora met India’s finance minister on 1 November and the prime minister, Manmohan Singh, later in the day. He admitted there appeared to be few options to consider apart from raising prices or cutting duties.

The Indian crude basket has risen by 145% since April 2004, but retail prices of petrol have gone up by just 29% and those of diesel by 40%.