The oil marketing companies (OMCs) and the ministry of petroleum and natural gas will hold on to price revisions for the time being. While petrol price revisions, to be done independently by oil marketing companies, will await cues from possible excise duty restructuring in the Budget and crude prices movement for at least another week, the ministry does not see any reason to react to diesel, LPG and kerosene.
Highly placed officials said crude prices had risen due to volatility and it has to be seen how sustainable the $110-117 level per barrel is. Besides, it is widely expected that the geopolitical crisis in Libya, the main reason for the price rise, is expected to reach some conclusion by next week. Most countries are depend on Libya due to its production of sweet crude.
"If the prices continue to go up for the next 15-20 days, one has to take a call on controlled products like diesel, kerosene and LPG. That will depend again on the decision of the EGoM,” official sources said.
Sources in the OMCs said the rising prices were critical from the point of view of rising inflation. "If the excise duty is reduced on crude imports, it will be a big relief and act as cushion for the OMCs even if we do not revise prices upwards immediately," said an official in one of PSU oil marketing companies.
If there is no change in the excise duty, a decision will be taken after watching the crude price rise for a span of seven to 10 days. The picture will become clearer by the end of next week, officials said.
In the international market crude future prices fell to $97.28 a barrel from $103.41on the New York Mercantile Exchange following reports that Saudi Arabia had assured it would compensate for any cut in the Libyan capacity and the International Energy Agency may release emergency stockpiles if the crisis continues. Similarly, price of Brent crude oil fell to $114 a barrel from a high of $119.
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Libya produces about 1.5 million barrels a day, or nearly 2 per cent of the world's supplies. In India, the prime minister’s economic advisory council has termed the spike in oil prices a temporary blip and expects it to subside when the situation improves in West Asia. The council had also cautioned that some action would be needed if prices continue to remain high.
The finance ministry has agreed to bear one-third of fuel subsidies and, to this effect, had doled out Rs 21,000 crore already to OMCs to sell automobile and cooking fuel below their imported cost.
The government provides subsidy of about Rs 10.74 per litre on diesel, Rs 21.60 a litre on kerosene and Rs 356.07 per cylinder on LPG. It has provided a little over Rs 3,000 crore this year for cooking gas and kerosene sold through the public distribution system.