Weak coalition unlikely to hike oil prices

New government could wait till the Budget.

With the Andhra Pradesh poll results throwing up prospects of a weak government at the Centre, domestic oil prices may not be revised, despite their increase in the international market.

Petroleum ministry officials seem to be of the view that stability of the government at the Centre is inversely proportional to stability in the domestic prices of oil.

In case a loose coalition manages to form a government at the Centre, the possibility of its keeping domestic oil prices untouched is far greater as it would prefer not to take on the wrath of the voters.

"Petroleum prices are a holy cow. The moment you disturb them, you can be sure of trouble," said a senior petroleum ministry official. "The last thing that a weak government at the Centre would like to do is to revise the retail prices of petroleum products," he said.

This is especially true of the prices of kerosene and cooking gas, which were last revised more than two years ago.

Any fragile coalition at the Centre would not be able to withstand pressure from its partners not to increase prices of the two popular cooking fuels.

This was amply demonstrated during the National Democratic Alliance (NDA) rule which had to roll back its politically unpopular decisions many times.

In the 2002-03 Budget, when it announced a Rs 40 hike in the price of a cooking gas cylinder, it had to rollback its price by Rs 25 within a fortnight.

Officials are of the view that the new government at the Centre would wait till the Budget to address the issue of high international prices of crude oil and petroleum products and their impact on domestic prices.

It is quite possible that the oil companies may be given some relief through changes in levies on crude oil and petroleum products.

Senior petroleum ministry officials also point out that not all the oil companies are hit by the high international prices of oil.

For example, the turnover of upstream major Oil and Natural Gas Corporation (ONGC) goes up by Rs 900 crore with even a one dollar hike in the barrel price of oil.

Similarly, the downstream companies have sufficient cushion in their prices of various products so as to easily absorb the impact of high international prices.

This is evident from the fact that despite their crying hoarse over the "losses" suffered due to high international prices of crude oil and petroleum products and stationary domestic prices, all these companies have been registering higher profits every year.