Ministerial panel to decide diesel price hike Dec 22

A ministerial panel under Finance Minister Pranab Mukherjee meets here Dec 22 to take a call on allowing state-run fuel retailers to hike the prices of diesel, with crude oil now costing around $90 per barrel in global markets.


“As far as petrol prices are concerned, the government has already de-regulated this segment of transport fuels. We have asked for a similar hike in the prices of diesel to help oil marketing companies cut their under-recoveries,” a senior official in the ministry said.

Under-recoveries is an oil industry jargon for fuel retailers having to sell their products below their cost of production.

“The empowered group of ministers is slated to convene a meeting on Dec 22 on diesel prices. We have said that the oil marketing companies are losing around Rs.5.4 per litre on under-recoveries in diesel. A decision will be taken accordingly,” the oil ministry official added.

The meeting comes against the backdrop of a decision taken by the three state-run oil firms – Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum – to hike prices of petrol by up to Rs.3 per litre.

The last fuel hike was in June 25, when the government ended state controls on pricing of petrol. It had also increased prices of diesel, cooking gas and kerosene at that time, while promising to eventually give up control on pricing of diesel as well.

The previous major hike saw petrol prices increase by Rs.3.5 per litre, diesel by Rs.2 per litre, kerosene by Rs.3 per litre and cooking gas by Rs.35 per cylinder.

The freedom to price gasoline or petrol was left to the state-run oil marketing companies – a move that had met with vehement opposition from opposition parties and expected to repeat again this time as well.

Left parties have already warned they will protest intensely if the United Progressive Alliance (UPA) government allows a hike in petroleum fuel prices, with Communist Party of India-Marxist (CPI-M) politburo member Biman Bose asking citizens to be vocal in their protest against any “anti-people” decision.

Crude oil prices, which were in the range of $79 a barrel during June, have since soared to touch a two-year high of about $90 a barrel Tuesday, before settling around $88.5 per barrel.

In the process, oil marketing companies’ losses on account of under-recoveries, or for selling fuels below cost price, is expected to balloon further this year, unless the government allows them to raise prices.

Some earlier estimates had put the combined losses of these companies on under-recoveries at around Rs.53,600 crore (nearly $12 billion) based on a crude price of $79 a barrel.

If prices are not revised, the three state-run oil retailers are likely to end the fiscal with a loss of close to Rs.67,000 crore (nearly $15 billion) on account of loss on sale of diesel, cooking gas and kerosene.