Oil prices may go up by Rs 2-3/litre

The government may increase prices of petrol and diesel by Rs 2-3 per litre later this month.

However, the final extent of the hike will depend on the value of bonds the finance ministry provides to the oil companies.

A decision was likely by the third week of May, Petroleum Secretary MS Srinivasan told reporters today. Elections are on in five states and their results are expected by May 11.

International crude oil prices have skyrocketed in the last few weeks, climbing more than 24 per cent this year to nearly $75 a barrel today. This follows mounting tension over Iran's nuclear stand-off with the United States.

Finance Minister P Chidambaram has also said a price rise is inevitable. Retail oil prices were last hiked by 7 per cent in September 2005.

Srinivasan said the burden of higher crude oil prices would be shared by the government, oil firms and consumers.

Sources added that top officials and the ministers of finance and petroleum were scheduled to meet next week. The matter will then be considered by the Cabinet.

Oil marketing companies like Indian Oil, Bharat Petroleum and Hindustan Petroleum are losing Rs 9 per litre as they are forced to sell petrol below cost, while the loss on diesel is Rs 10 per litre.

The loss on domestic cooking gas is around Rs 120 a cylinder. The companies are expected to suffer a combined revenue loss of Rs 75,000 crore in 2006-07.

This April, Indian Oil had under-recoveries of Rs 2,500 crore, with the entire industry expected to lose around Rs 5,000 crore. Gross under-recoveries in the previous fiscal amounted to Rs 39,600 crore.

Govt to consult allies first: FM

Hyderabad: Finance Minister P Chidambaram has said the government will take a call on hiking domestic oil prices after consulting the UPA allies.

"It is no longer an economic issue, but a political one when oil prices cross $50-60 a barrel," Chidambaram said. "It is for the petroleum minister to meet them. So far it has not been done."