IOC seeks hike in LPG price

State-run Indian Oil Corporation has asked the government to allow it to raise the prices of cooking gas (LPG) and kerosene by Rs 94.03 per cylinder and Rs 4.90 per litre, respectively, to bring the retail cost in line with the cost of raw material.

The state-run oil marketing firms have not been allowed to raise prices of the two cooking fuels during the last two years despite the cost of raw material going up about 50 per cent and the government subsidy on the two being cut by one-third.

"Due to the non-revision of selling price since March 2002, oil marketing companies incurred huge under-recoveries during 2002-03, since the international prices of crude oil and petroleum products increased significantly, resulting in an increase in refinery transfer prices," IOC wrote to the petroleum ministry.

While the under-recoveries on selling LPG and kerosene below the cost were about Rs 7,200 crore for the industry last fiscal, IOC has estimated Rs 6,984 crore loss on the two products in 2004-05 if the prices were not increased.

"The required increase in ex-storage point prices of kerosene and LPG amounted to Rs 4,896.91 per kilolitre and Rs 6,621.79 per tonne (or Rs 94.03 per cylinder), respectively. These increases were over and above the fixed subsidy levels considered for 2004-05 at Rs 815.12 per kilolitre for kerosene and Rs 22.58 per cylinder for LPG," IOC said.

A petroleum ministry notification of January 28, 2003 allows companies to revise issue price of these products on a monthly basis to capture the variation in the cost price but the oil companies were never allowed to follow this principle.

Mindful of not dampening the 'India Shining' image during elections, the government has not allowed the oil companies to raise the prices of LPG and kerosene as also the auto fuels -- petrol and diesel -- despite the rising cost.

The oil companies lost nearly Rs 2,000 crore during January-March this fiscal for not being able to raise prices of petrol and diesel in step with the rise in crude oil cost, sources said.

The Rs 7,200 crore loss on LPG and kerosene sales in 2003-04 was split between the oil marketing companies -- Indian Oil Corporation, Bharat Petroleum Corporation Limited, Hindustan Petroleum Corporation Limited and IBP and the producers -- Oil and Natural Gas Corporation and Gail (India).

In a three-way split, the government decided to transfer a third of the burden to ONGC and Gail, another one-third through overpricing other products such as petrol and diesel, and the remaining third to be borne by the oil marketing companies, they said.

While ONGC, Gail and the oil marketing firms picked up the subsidy bill, the overpricing of other products by the retailers throughout the fiscal did not yield or match up to a third of the subsidy bill.

It fell short by Rs 1,300 crore. And this under-recovery will again be split equally between the producers and marketing firms.