Petro prices may be reviewed at year-end

The petroleum ministry could consider a review of retail petrol and diesel prices at the end of this year. A latest internal note on pricing of sensitive petroleum products has pointed out that the present circumstances (continuing volatility in international oil prices) mean that there is still some time before prices can be reviewed.

The note also underlines the fact that international oil prices are expected to rise in the coming winter months, a regular seasonal trend.

Sources said any eventual review was likely to result in only retail petrol prices being lowered and not diesel prices, on which margins continue to remain negative. International oil prices have come down from the high levels seen in August this year.

Crude prices are now in the range of $56-58 per bbl, as compared with $75 per bbl then. Prices of petroleum products have also shown a similar trend, though not in the same proportion.

At current price levels, oil marketing companies are still incurring under-recoveries on sale of diesel, kerosene and LPG. While the companies are earning Rs 4.50 on sale of every litre of petrol, the margins on diesel remain negative "" at Rs 1.50 per litre.

In the first half of 2006-07, the under-recoveries stood at Rs 33,500 crore, and were projected to touch Rs 67,000 crore for the full year. These will be offset by Rs 28,300 crore of oil bonds and Rs 24,000 crore coming in through upstream sharing.

Earlier in the week, Petroleum Minister Murli Deora had said that though there had been a softening in international crude oil prices, there was no case for a reduction in the price of petrol and diesel.

"Any decline in prices now would be premature and short-lived. If you look at the futures market, the price for the Indian basket in January is at $64 and $70 in June," Petroleum Secretary M S Srinivasan explained.

"Petrol accounts for just 8 per cent of the total volume of petroleum products sold. We have to look at the consolidated market," he added.

In June 2006, when the petroleum ministry had approached the Cabinet for an adjustment in retail prices, it had sought an increase of Rs 10.55 per litre for petrol, Rs 9.88 for diesel, Rs 17.16 for PDS kerosene, and Rs 114.45 per domestic LPG cylinder (in Delhi).

In the event, only petrol and diesel prices were increased, by Rs 4 and Rs 2 a litre, respectively, with no changes in the prices of the other two items. Subsequently, the Delhi government decided to forgo the additional sales tax to partially offset the increase in prices.

As a result, the net increase from June 21 amounted to Rs 3.34 per litre of petrol and Rs 1.78 per litre of diesel. At that time, the international crude oil price was around $67 per bbl.