 "Oil ministry mulls higher dose of diesel price increase")
To eliminate OMCs’ losses due to selling diesel below the market price, the government on January 17 had allowed phased decontrol of diesel prices, with a monthly dose of 50 paise. Although the underrecovery had come down to Rs 3.8 a litre in May, the rupee’s fall and rise in international prices pushed it up to Rs 9.29 a litre as on August 1.
According to ministry sources, Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) have been repeatedly asking for a higher dose of monthly diesel price increase.
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Petroleum Minister
M Veerappa Moily told a news channel on Wednesday that the government was considering OMCs’ proposal to increase the diesel price by more than 50 paise a month.
The fall in the rupee had impacted the underrecoveries of OMCs, largely in the last couple of months, as the currency was hovering above the Rs 60 mark.
A Rs 1 fall in the rupee would cost the OMCs Rs 9,000 crore a year in the form of underrecovery, while every $1 increase in crude oil prices would add another Rs 5,000 crore annually to the subsidy burden.
At current exchange rate, the underrecovery is likely to increase by at least another Rs 60,000 crore, taking the figure to above Rs 1.3 lakh crore. This is much higher than the Rs 80,000 crore expected by the Centre during the beginning of the year, when the exchange rate was around Rs 54. Diesel prices have been raised six times since the decontrol measures were adopted in January.
The government had also introduced dual pricing of diesel for bulk and retail customers in January. This was to save Rs 12,907 crore from the subsidy burden, through which bulk customers such as defence, railways’ and state transport utilities had to pay at the market price.
“The overall bulk market was nine million tonnes and we had around 78 per cent share in this. Since January, around 38 per cent of bulk customers have shifted to the retail platform. Of this, 50 per cent have shifted to IOC retail outlets,” said R S Butola, chairman of IOC.
On Wednesday, Moily confirmed there would be no revision in prices of liquefied natural gas (LPG) and kerosene for the moment. The under-recovery on subsidised LPG now stands at Rs 411.99 a cylinder, while that on kerosene stands at Rs 33.54 a litre.
OMCs are currently incurring a daily under-recovery of Rs 379 crore on the sale of diesel, kerosene and domestic LPG.