Fuel price hike likely this week

A hike in petrol and diesel prices looks imminent this week as Railway Minister Mamata Banerjee appears to have agreed to the proposal, sources said.

An Empowered Group of Ministers (EGoM) on Friday may decide to free petrol prices from government control, a move that will result in rates increasing by up to Rs 3.73 a litre, they added.

The panel headed by Finance Minister Pranab Mukherjee may, however, not approve of a similar hike for diesel and instead give the nod for a maximum increase of Rs 2 per litre.

Banerjee, who skipped the last EGoM meet on June 7, appears to have agreed to the price rise, sources said.

NCP supremo Sharad Pawar, too, had abstained from the panel's meeting on June 7.

Sources had said that with DMK leader and Fertilizer Minister M K Alagiri onboard, the EGoM may push for freeing petrol prices, a move that will see rates in Delhi rising by Rs 3.73 a litre. Petrol in Delhi currently costs Rs 47.93 per litre.

A similar decision on diesel would have resulted in rates going up by Rs 3.80 per litre, but Banerjee and Pawar remain opposed to any increase in the prices of a fuel that is used by the transport and agriculture sector and has inflationary impact.

With global crude oil trading below $80 a barrel, Deora sees this as the last opportunity to usher in reforms in the sector, which would otherwise need Rs 74,300 crore in subsidy to bridge the gap between retail prices and the imported cost.

In the absence of a consensus on freeing diesel prices, the oil ministry may push for a minimum Rs 2 per litre increase in rates, sources said.

Freeing of petrol prices would reduce the Rs 74,300 crore deficit by about Rs 5,000 crore. A one rupee per litre hike in diesel prices would cut the losses by Rs 3,800-4,000 crore.

Deora, who has on more than one occasion briefed the Prime Minister Manmohan Singh and EGoM head Mukherjee on the crisis that stares at the oil PSUs if no decision is taken, had twice tried for the EGoM to meet last week, but failed due to unavailability of ministers.

While there may not be any problem in freeing pricing of petrol, there were doubts about raising diesel prices, which many feel will add to the already high inflation.

In May, WPI-based inflation provisionally entered double digits at 10.16 per cent.

Sources said also a Rs 25 per cylinder hike in domestic LPG rates is also on the cards, but it, too, has to pass the muster of Banerjee and Pawar.

State oil firms currently lose about Rs 215 crore per day on selling fuel below the imported cost. They lose Rs 3.73 a litre on selling petrol, Rs 3.80 per litre on diesel, Rs 18.82 a litre on PDS kerosene and Rs 261.90 on every 14.2-kg LPG cylinder.