NEW DELHI: Get ready to pay more for motor fuels after January 17 when the PM's ministerial panel on commodity prices is meeting to approve a likely increase of Rs 2-3 per litre in price of petrol and Rs 1-2 a litre in diesel in a desperate bid to reduce the mounting losses of state-owned oil marketing firms reeling under a record $100/barrel-mark crude prices.
The oil ministry is pushing for an increase of Rs 4 a litre on petrol and Rs 2 on diesel. But such a steep increase may not pass political muster of the ministerial panel.
Last time the prices were increased by this amount, political pressure forced a rollback. What looks possible is a moderate increase of Rs 2-2.50 on petrol and Rs 1-1.50 on diesel. The increase could be on the lower side if the decision to increase prices comes with some reduction in excise and customs levies.
Oil minister Murli Deora is already holding parleys to sew up support from UPA constituents, particularly the Left, before the ministerial panel meets. He is pushing concerns over the failing financial health of national oil companies to bring around coalition partners on the issue. CPM's Sitaram Yechury and CPI's Gurudas Dasgupta have already been sounded out on how these firms will slide into the red if pump prices were not increased. He is to hold similar consultations with UPA components in the lead-up to the meeting.
The response to Deora's campaign has been sympathetic, unlike in previous times when these leaders had opposed any increase in pump prices and sought reduction in excise and customs duties to stave off a revision. "The inevitability of a price-increase in dawning on everyone... allies are realising that with oil hitting a record and staying above $90/barrel, the present retail priceline cannot be sustained for long," a source close to the political discussions told TOI.
The numbers, indeed are alarming. The mix of crude India buys, which is lower than the US rates, touched $92.29/barrel on Wednesday. This is nearly $22-23 more than crude's price prevailing when petrol and diesel prices were raised on June 6, 2006. The oilmarketing companies are expected to close the fiscal with a total loss of Rs 69,753 crore because the government did not allow them to raise pump prices. This loss would have been higher had the rupee not appreciated over 12-13% against the dollar. They are losing Rs 8.74 on a litre of petrol, Rs 9.92 on diesel, Rs 20.53 on kerosene and Rs 256.35 on each cooking gas refill.
The pressure has forced market leader IndianOil Corporation, which bears nearly 60% of the Rs 340 crore daily loss being run up on fuel sales by all the oilmarketing firms, to consider selling Gilts to raise Rs 2,000 crore this month to keep refinery fires burning.
The company, which during the 90s had bailed the sovereign out, suffered a fall in the pecking order of international finance last month when global rating agency Moody's downgraded its rating. That is expected to make its working capital borrowings, expected to increase to Rs 3,000 crore, even costlier.
IndianOil chairman Sarthak Behuria said, "We need a lasting solution, not ad-hoc responses. The government should free pricing of petrol and diesel from its control and subsidise domestic LPG (cooking gas) and kerosene from the Budget." To make a point to the government, the company broke ranks with sister firms to raise prices of its branded fuels which are outside pricing control.
At present, losses on motor and kitchen fuels are shared between the government that issues bonds to companies, oil producers like ONGC giving discounts, and fuel retailers absorbing some losses.
The oil ministry is pushing for an increase of Rs 4 a litre on petrol and Rs 2 on diesel. But such a steep increase may not pass political muster of the ministerial panel.
Last time the prices were increased by this amount, political pressure forced a rollback. What looks possible is a moderate increase of Rs 2-2.50 on petrol and Rs 1-1.50 on diesel. The increase could be on the lower side if the decision to increase prices comes with some reduction in excise and customs levies.
Oil minister Murli Deora is already holding parleys to sew up support from UPA constituents, particularly the Left, before the ministerial panel meets. He is pushing concerns over the failing financial health of national oil companies to bring around coalition partners on the issue. CPM's Sitaram Yechury and CPI's Gurudas Dasgupta have already been sounded out on how these firms will slide into the red if pump prices were not increased. He is to hold similar consultations with UPA components in the lead-up to the meeting.
The response to Deora's campaign has been sympathetic, unlike in previous times when these leaders had opposed any increase in pump prices and sought reduction in excise and customs duties to stave off a revision. "The inevitability of a price-increase in dawning on everyone... allies are realising that with oil hitting a record and staying above $90/barrel, the present retail priceline cannot be sustained for long," a source close to the political discussions told TOI.
The numbers, indeed are alarming. The mix of crude India buys, which is lower than the US rates, touched $92.29/barrel on Wednesday. This is nearly $22-23 more than crude's price prevailing when petrol and diesel prices were raised on June 6, 2006. The oilmarketing companies are expected to close the fiscal with a total loss of Rs 69,753 crore because the government did not allow them to raise pump prices. This loss would have been higher had the rupee not appreciated over 12-13% against the dollar. They are losing Rs 8.74 on a litre of petrol, Rs 9.92 on diesel, Rs 20.53 on kerosene and Rs 256.35 on each cooking gas refill.
The pressure has forced market leader IndianOil Corporation, which bears nearly 60% of the Rs 340 crore daily loss being run up on fuel sales by all the oilmarketing firms, to consider selling Gilts to raise Rs 2,000 crore this month to keep refinery fires burning.
The company, which during the 90s had bailed the sovereign out, suffered a fall in the pecking order of international finance last month when global rating agency Moody's downgraded its rating. That is expected to make its working capital borrowings, expected to increase to Rs 3,000 crore, even costlier.
IndianOil chairman Sarthak Behuria said, "We need a lasting solution, not ad-hoc responses. The government should free pricing of petrol and diesel from its control and subsidise domestic LPG (cooking gas) and kerosene from the Budget." To make a point to the government, the company broke ranks with sister firms to raise prices of its branded fuels which are outside pricing control.
At present, losses on motor and kitchen fuels are shared between the government that issues bonds to companies, oil producers like ONGC giving discounts, and fuel retailers absorbing some losses.
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