Facing opposition from key allies in the United Progressive Alliance (UPA) government, Finance Minister Pranab Mukherjee and Petroleum Minister Murli Deora today discussed an “all-acceptable” increase in fuel prices, but it appeared the two failed to reach a consensus and the fuel price increase may not happen immediately.
“No decision has been taken,” Deora told reporters after an hour-long meeting.
Public-sector oil retailers are projected to lose Rs 45,571 crore on selling petrol, diesel, domestic LPG and kerosene below cost. To avert bankruptcy, the Kirit Parikh panel had suggested freeing auto fuels from government control, along with a steep increase in cooking fuel.
Last week, Deora’s ministry did not take the proposal to free petrol prices, along with increase in diesel, cooking gas and kerosene rates, to the Cabinet, because of opposition from the Trinamool Congress and the Dravida Munnettra Kazhagam (DMK).
| OILY MESS |
| * Oil retailers are projected to lose Rs 45,571 crore on selling petrol, diesel, LPG and kerosene below cost |
| * To avert bankruptcy, the Kirit Parikh panel had suggested freeing auto fuels from government control and a steep rise in cooking fuel price |
| * Finance Minister Pranab Mukherjee made no promise of giving anything more than the Rs 12,000 crore promised earlier |
“The meeting was about underrecoveries (revenue losses) of oil marketing companies and the Kirit Parikh report. No decision has been taken,” Oil Secretary S Sundareshan said.
Pending a decision, Deora wanted the government to fulfil its promise of meeting the Rs 31,574-crore revenue IndianOil, Bharat Petroleum and Hindustan Petroleum would lose on selling domestic LPG and kerosene below cost.
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However, Mukherjee made no promise of giving anything more than the Rs 12,000 crore already promised, sources said adding the meeting could not decide what could be an acceptable price increase to all constituents of the ruling UPA.
IOC, BPCL and HPCL currently sell petrol at a loss of Rs 4.72 a litre, diesel at Rs 2.33 per litre, kerosene at Rs 18.06 a litre and domestic LPG at Rs 287.59 per cylinder.
Deora, sources said, was of the opinion that any moderate price increase would help curtail revenue losses of the future but the government must urgently decide on the losses that have already been incurred this financial year.
In July last year, it was decided that the government would meet the revenues retailers lost on LPG and kerosene. Those lost on petrol and diesel were to be made good by upstream companies like ONGC.
The Rs 13,997-crore revenue loss on auto fuels was being made good, but issues remained with the losses on LPG and kerosene.
Deora had on February 11 submitted a memorandum to the prime minister, asking the government to cover the unmet Rs 19,574 crore revenue loss on LPG and kerosene sale. Today’s meeting with the finance minister took that forward, but no decision was reached.
Sources said both Mukherjee and Deora were in favour of Rs 2-3 a litre increase in petrol and diesel prices and Rs 25 per cylinder rise in LPG rates, but the allies did not want diesel, LPG and kerosene prices to be touched.
Owing to this, the two ministers deferred a decision, pending more consultations within the ruling UPA, they said.
The proposal of free petrol prices would lead to a price increase of Rs 4.72 a litre. A similar move on diesel, as suggested by the expert group on pricing reforms headed by Kirit Parikh, would have resulted in rates going up by Rs 2.33 a litre.
Sources said the petroleum ministry was willing to settle for Re 1 a litre increase in diesel rates, provided that LPG and kerosene prices were also raised.
The increase sought will, however, not be in the range of the steep Rs 100 per cylinder and Rs 6 a litre increase, respectively, suggested by the expert group.
Sources said the ministry was bargaining for at least half the price increase suggested by the panel, but might settle for Rs 25 per cylinder increase in LPG rates and Re 1 a litre rise in kerosene prices.
At present, petrol is sold at a loss of Rs 4.72 a litre, diesel at Rs 2.33 per litre, kerosene at Rs 18.06 per litre and domestic LPG Rs 287.59 per cylinder.
In case the government goes for marginal increases, the Cabinet would also have to decide on how the remaining revenue loss would be met.