Govt may hike petrol prices by Rs 2/l; duty rejig unlikely

The government may raise petrol prices by Rs 2 a litre and diesel prices by Re 1 a litre this week, but a duty rejig to minimise the impact of high international crude oil prices looks unlikely.

"The proposal to the Cabinet will be for a Rs 2 per litre hike in petrol and Re 1 per litre hike in diesel prices," a petroleum ministry official said.

The decision on the increase will be taken by the Cabinet, headed by Prime Minister Manmohan Singh, possibly later this week.

"Earlier, we were given an indication of a Cabinet meeting this (February 4) afternoon, but it is not happening today. Hope the meeting takes place soon," the official said.

The official said state-run IndianOil, Bharat Petroleum and Hindustan Petroleum were together projected to lose over Rs 71,000 crore on sale of petrol, diesel, domestic LPG and PDS kerosene this fiscal as the government had capped retail prices.

"We wanted a cut in Customs duty on the products as well as crude oil and also a Re 1 a litre reduction in excise duty on petrol and diesel. But I don't think that is happening just now," the official said. The state-run firms lose Rs 10.57 per litre on petrol, Rs 11.56 on diesel, Rs 19.89 on kerosene and Rs 331 on each LPG cylinder.

Last week, a Group of Ministers (GoM), headed by External Affairs Minister Pranab Mukherjee, had left a decision on fuel prices to the Cabinet after the panel was split in the middle on the issue.

Petroleum Minister Murli Deora insisted on a duty cut rather than a price hike, while Finance Minister P Chidambaram was of the opinion that it could not be a one-way street.

Petrol and diesel prices were last raised in June 2006 when crude oil was at $67 a barrel. It is at $92 a barrel this year. LPG prices were last raised by Rs 20 per cylinder in November 2004 when crude was at $34 a barrel. Kerosene prices have not been changed since 2002 when crude was at $23 per barrel.

An increase of Re 1 per litre in the price of petrol would give Rs 90 crore a month additional revenue to public sector oil companies. A similar hike in diesel would fetch Rs 360 crore a month. A Rs 10 per cylinder increase in LPG prices would result in Rs 58 crore additional revenues every month.