The Finance Minister Pranab Mukherjee-headed Empowered Group of Ministers (EGoM) on fuel would meet on May 11 to review diesel prices and discuss ways to cut the rising losses of oil marketing companies.
The meet could lead to a diesel price increase of around Rs 2 per litre, after a gap of nearly 11 months. A Rs 2-3 increase in the price of petrol, which had been freed from government control last June, is also on the cards immediately after polling in the last phase of Assembly elections is completed on May 10.
This increase does not require government approval, as petrol stands decontrolled. Stocks of oil marketing companies (OMCs) gained up to 4 per cent at the Bombay Stock Exchange, on a day when the Sensex fell by 0.35 per cent.
The OMCs — Indian Oil, Bharat Petroleum and Hindustan Petroleum — which purchase crude oil at market rates, are required to sell diesel, kerosene and liquefied petroleum gas (LPG) at government-subsidised prices, resulting in losses.
The companies incur an under-recovery or revenue loss of Rs 8.50 on every litre of petrol, Rs 16.17 on every litre of diesel, Rs 29.69 on every litre of kerosene and Rs 330 for every LPG cylinder.
The diesel price has not been raised since June 26 last year. At these rates, the OMCs could end the current financial year with an all-time high loss of Rs 180,000 crore.
The OMCs incurred a gross under-recovery of over Rs 47,000 crore for the first three quarters of the last financial year. The under-recovery for the last quarter is estimated at about Rs 37,000 crore.
These losses are partly compensated through a mix of cash subsidy from the government and discounts from upstream companies like Oil and Natural Gas Corporation and Oil India and partly absorbed by the OMCs.