Group of ministers to meet on June 9, quantum of increase the only issue, says senior official
The Ministry of Petroleum and Natural Gas has made a case for increasing the prices of these three fuels. This even as the government has said its growth target for the year will not be met because of inflation pressures.
An empowered group of ministers (EGoM) on fuel would meet on June 9 to decide the quantum of increase, said a senior ministry official.
| TOUGH TIMES | |||
| Product | Increase in June last year | Current price in Delhi | Current under-recovery |
| Diesel | Rs 2/litre | Rs 37.75/litre | Rs 16.49 |
| Kerosene | Rs 3/litre | Rs 12.32/litre | Rs 29.69 |
| Domestic LPG | Rs 35/cylinder | Rs 345.35/cylinder | Rs 330.00 |
| Rs 15.44/litre (or 32.21%) Rise in petrol price since June 25, 2010, when the fuel was decontrolled | $85.09/barrel Average price of Indian basket of crude oil in FY11 | $110.55/barrel Current average price of crude oil |
| Source-Indian Oil, Petroleum Planning and Analysis Cell | ||
These three products have a combined weight of 6.32 per cent in the wholesale price index, which rose 8.66 per cent in April. The weight of diesel, used in transportation, is a substantial 4.67 per cent. The latest increase in petrol prices by Rs 5 a litre has not started reflecting in the inflation data yet.
The petroleum subsidy bill of the government jumped 70 per cent in the last financial year to Rs 78,159 crore. This forced the government to increase the subsidy burden of upstream oil companies (ONGC, OIL and GAIL) from one-third to 38.76 per cent. “The subsidy burden of these companies may be back to one-third from the current financial year,” said the official.
At Rs 23,640 crore, the government has underestimated its petroleum subsidy bill for the current financial year. With revenues already under pressure, the fiscal deficit target of 4.6 per cent of the gross domestic product may not be met.
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“Price of diesel, LPG and kerosene will have to go up (to cover the rise in crude oil prices). What EGoM has to decide is by how much,” said the official.
The last increase in prices of these products was in June last year, when crude oil was around $72 per barrel. Crude oil has averaged $110.55 a barrel this month. In June 2010, diesel prices were increased by Rs 2 per litre, kerosene by Rs 3 per litre and LPG by Rs 35. A similar increase is likely this June as well.
At present, government oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — lose Rs 16.49 on every litre of diesel, Rs 29.69 on every litre of kerosene and Rs 330 on every LPG cylinder that they sell. At this rate, their annual loss for the current year will be Rs 180,000 crore, more than double compared to Rs 78,159 crore in 2010-11.
On May 14, these companies raised petrol prices by Rs 5 per litre to Rs 63.37 per litre. Even though petrol has been decontrolled since June last year, they have not been able to pass on the full increase in input costs.