Even as state-owned oil marketing companies (OMCs) continue to reel under the surge in global crude oil prices, the Congress-led United Progressive Alliance (UPA) government — faced with political compulsion in view of forthcoming assembly elections in Gujarat and Himachal Pradesh — is understood to have decided on Wednesday to defer any decision on raising fuel prices.

“The state-owned OMCs are being badly hit due to the unprecedented rise in international (crude) prices. We are trying to see if we can find a solution next week,” Petroleum Minister Murli Deora told newspersons here.

Rising crude oil prices

As part of the strategy to cope with the rising global crude oil prices, which is threatening to cross the record level of $100 per barrel, the Petroleum Ministry is understood to have floated the proposal to either marginally raise petrol and diesel prices or cut duties on petroleum products.

With the crucial election to the Gujarat assembly round the corner, the top leadership of the Congress, which is leading the ruling United Progressive Alliance  coalition at the Centre, does not want to take any political risk by raising the retail prices of petrol and diesel.

Political sources said the majority of the Congress is also opposed to any hike in fuel prices.

Allies don’t want it

Key coalition partners of the Congress are also not in favour of making any hike in fuel prices in view of the forthcoming elections in Gujarat and Himachal Pradesh.

Besides, the Congress-led UPA government does not want to make any dent in its aam aadmi plank by allowing even a marginal hike in petrol and diesel prices. Any hike in auto fuel prices will have a cascading effect thereby pushing up inflation.

A few days back Deora had a meeting with Finance Minister P Chidambaram to discuss measures to cope with the record crude oil prices.

Subsequently, Deora had a meeting with the Prime Minister Manmohan Singh and apprised him of the situation arising out of the spiralling global crude oil prices.

Only last month the government devised a package to take care of two-third of the Rs 55,000 crore revenue loss to public sector oil firms.

This package was calculated on the basis of the Indian basket of crude oil price averaging $70 a barrel. But with global crude prices threatening to reach an alarming $100 a barrel the compensation is now being considered inadequate.

Revenue losses

As per an estimate, the state-owned OMCs might incur revenue losses of Rs 70,000 crore if global crude oil prices were to remain above $90 for the rest of the fiscal 2007-08.

The three state-owned OMCs — IOC, BPCL and HPCL — are currently losing over Rs 240 crore per day on sale of petrol, diesel, domestic liquidfied petroleum gas (LPG) and public distribution system kerosene.

They are making a loss of Rs 4.94 on every litre of petrol sold, Rs 6.50 per litre on diesel, Rs 16.42 a litre on kerosene and Rs 207 per cylinder on LPG.