Despite one of the steepest hike in fuel prices, state-run oil firms will still end the fiscal will a whooping Rs 1,21,700 crore revenue loss on selling diesel, domestic LPG and kerosene at government rates.
"After taking into account the increase in diesel, domestic LPG and kerosene price as well as cut in customs and excise duty, the three oil marketing companies will see their under-recoveries (revenue loss) come down from Rs 1,71,140 crore to Rs 1,21,704 crore for the fiscal," said an official of Indian Oil Corp (IOC), the nation's largest oil firm.
An Empowered Group of Ministers had yesterday approved a Rs 3 per litre hike in diesel price, which after including local sales tax translated into a Rs 3.37 per litre increase in retail price at Delhi. This steepest raise in diesel rates ever, more than the Rs 3 per litre hike effect in June 2008.
A Rs 50 per cylinder hike in domestic LPG rates equals the increase in the then NDA government led by Atal Bihari Vajpayee had effect in March 2000.
The Rs 2 per litre increase in kerosene rate is the second hike in the price of cooking fuel used by poor in a decade. Last June, kerosene rates were raised by Rs 3 a litre.
IOC Chairman R S Butola said despite the Rs 3 per litre increase coupled with cut in customs or import duty from 7.5% to 2.5% and reduction in excise duty from Rs 4.60 per litre to Rs 2 a litre, diesel is still being sold at a loss of Rs 6.90 per litre.
Similarly, kerosene is being sold at Rs 25.37 per litre loss and domestic LPG at a loss of Rs 331.13 per 14.2-kg cylinder.
The increase had been necessitated at crude oil price continued to rule above $110 per barrel as against $75 a barrel in June last year, when the last revision took place.
Besides the price hike, the EGoM decided to abolish the 5% import duty on crude oil, and slashed the same on diesel and petrol by 2.5% from 7.5%. Excise duty on diesel could not be cut below Rs 2 per litre as this is the levy which goes for national highway development.
The decision to cut customs duty on petrol also meant that the Rs 1.98 per litre hike needed to level retail prices with their cost would no longer be required, he said.
The reduction in excise duty on diesel would lead to a revenue loss of Rs 23,000 crore this fiscal, while in the customs duty cut the government will forego Rs 26,000 crore. The price hike would help the oil companies limit their revenue loss by Rs 21,000 crore, but they still would end the fiscal with about Rs 121,704 crore of revenue loss.
After the hike, diesel in Delhi costs Rs 41.12 a litre while a bottle of domestic LPG is priced at Rs 395.35. Kerosene sold through public distribution system (PDS) is now priced at Rs 14.83 per litre.