The government may increase petrol price by Rs 2 a litre and diesel by Re 1 per litre unless excise duty on the two fuels are cut to neutralise the impact of firming international oil rates.
State fuel retailers Indian Oil, Hindustan Petroleum and Bharat Petroleum currently lose Rs 135 crore per day on sale of petrol, diesel, LPG and kerosene and their annual revenue loss for current fiscal is estimated to be at Rs 38,700 crore.
The basket of crude oil India imports has averaged $70.49 per barrel in the second fortnight of June against the May average of $58, sending alarm bells ringing, a Petroleum Ministry official said.
"We have to act to save our PSU," he said.
"The burden (of rising global oil prices) has to be shared equally between the companies, the government and consumers."
PSUs lose Rs 2.96 a litre on diesel and Rs 6.08 per litre on petrol.
"One-third of this or Rs 2 per litre on petrol and Re 1 on diesel can be passed on to consumers," he added.
The rest of the losses would be covered by issue of government bonds to the retailers and subsidy sharing by upstream firms like ONGC.
"If the Finance Minister Pranab Mukhejree cuts excise duty on the two fuels, consumers can be spared from price hike," he said.
Petrol attracts an excise duty of Rs 11.35 per litre and diesel Rs 1.60 a litre. Besides Rs 2 a litre road cess is levied on the two fuels.
The official said the proposal to hike petrol and diesel rates would have to go to the Cabinet for approval.
Petroleum Minister Murli Deora refused to answer questions on price hike, but the issue of deregulation of petrol and diesel prices was still under consideration of the government.
The government has been mulling decontrolling petrol and diesel prices for couple of months now but may be fast losing the window as the move would now result in steep rise in fuel prices.
Freeing of fuel prices was idle when crude had fallen to below $40 a barrel last year.
The three firms are losing Rs 69.49 per 14.2-kg LPG cylinder and Rs 12.65 on every litre of kerosene, the official said.
The state-run firms were till last month selling diesel at Rs 0.32 a litre profit, which helped them partly neutralise the losses on sale of petrol, domestic LPG and kerosene.
For the 2009-10 fiscal, the three firms, which calculate desired retail end prices on 1st and 16th of every month based on the average of previous fortnight, are estimated to lose Rs 38,700 crore on fuel sales.
The official said IOC, BPCL and HPCL are currently losing about Rs 22 crore per day on sale of petrol, Rs 53 crore on diesel, Rs 48 crore on kerosene and Rs 11 crore on LPG.
