With the government apparently dragging its feet on hiking fuel prices, Oil Minister S Jaipal Reddy today took up with Finance Minister Pranab Mukherjee the Rs 450 crore per day loss oil firms incur on selling fuel below cost.
Reddy met Mukherjee this afternoon to apprise him of the precarious financial state of the state-owned oil firms, who are living off borrowed money in the absence of the government raising prices of diesel, domestic LPG and kerosene.
"I am concerned about the increasing under-recoveries (revenue losses) of oil marketing companies (OMCs). Everyday, OMCs are incurring under-recoveries of about Rs 450 crore," Reddy told reporters after meeting Mukherjee.
An Empowered Group of Ministers (EGoM) headed by Mukherjee, which decides on revising rates of the sensitive products, has not met since June last year even though crude oil prices have spiralled by about 50%.
The EGoM was originally scheduled to meet on May 11, but was postponed at the last moment. There was a talk of an EGoM, which comprises of representatives of all major allies in the ruling UPA, meeting on June 9, but the meet was never scheduled for that day.
Reddy said no new date for the EGoM meeting has been fixed yet.
His ministry is pushing for a Rs 3-4 per litre hike in diesel and Rs 20-25 per cylinder increase in LPG rates. Also, it is looking at a possible hike in kerosene prices.
State-owned oil firms had last month hiked petrol prices by a steep Rs 5 per litre and are looking another small increase next week. Petrol prices were freed from government control in June last year and Indian Oil, Bharat Petroleum and Hindustan Petroleum have the freedom to fix retail rates.
Oil companies are losing Rs 14.22 on the sale of every litre of diesel at the current price of Rs 37.75 per litre in Delhi.
Besides, state oil firms lose Rs 27.47 a litre on kerosene and Rs 381.14 per 14.2-kg domestic LPG cylinder.
The three firms may end the fiscal with a revenue loss of Rs 160,568 crore, at least half of which will have to be met by the government from its Budget.
Reddy said the issue of compensation of the oil firms for selling fuel below cost is decided by the EGoM and "no date for the next EGoM meeting has been fixed yet."
The rates for the three products were last hiked in June, 2010, when crude was ruling at $72 per barrel. The basket of crude oil India buys averaged $110 a barrel this month.
