For UPA, petro pricing a matter of convenience

For UPA, petro pricing a matter of convenience

In poll mode, govt restrains oil companies from fresh hike

For UPA, petro pricing a matter of convenience

Petrol pricing seems to have become a matter of convenience for the government in contravention to the market-driven price mechanism put in place since June last year.

Apparently succumbing to an unwritten diktat from the ruling Congress-led UPA alliance, currently embroiled in Assembly polls in five states, the state-owned oil marketing companies have kept in abeyance the hike in petrol prices since January 15 last. The deregulation mechanism envisages reviewing petrol prices once every fortnight keeping global crude price trends in view.

With the ongoing spiralling rise in global crude oil prices severely hitting the bottom-line of the state-owned OMCs, the government is coming under intense pressure to take a call on hiking prices of all the four mass-consumed petroleum products-petrol, diesel, LPG and kerosene. However, the UPA government is obviously resisting the pressure from the OMCs for routine hike in petrol prices in view of its apparent political compulsions due to the ongoing Assembly polls. Sources in the petroleum ministry say the retail prices of petrol and diesel are likely to go up soon after the conclusion of the ongoing assembly elections in five states.

“As soon as the assembly elections are over the government is expected to take a look at the upward revision in prices of petroleum products keeping the global crude oil price in mind,” sources in the Petroleum Ministry told Deccan Herald.

“We are hopeful that government would take an urgent look at oil price issue once polls are over,” highly placed sources in Indian Oil Corporation (IOC)-country’s largest oil retailer- said.

Under the current oil pricing mechanism, the government has allowed the OMCs to fix the retail price of petrol as per market rates though the same mechanism is not applied to the diesel and LPG pricing.

However, putting aside the price deregulation mechanism, the OMCs are not exercising their right to fix the petrol price as per the market rate since January 15 this year in the face of “unwritten” diktat from the Petroleum Ministry. The three state-owned OMCs-IOC, Bharat Petroleum and Hindustan Petroleum— had last hiked petrol price by Rs 2.50 per litre on January 15. The government had then faced the wrath of Opposition parties for allowing oil firms to go for such a “stiff”  hike.

Since deregulation of rates in June last year, the rates have gone up about Rs 7 per litre in five installments to Rs 58.37 per litre. Subsequently, the Petroleum Ministry is understood to have asked the OMCs not to go for any further hike in petrol prices despite rise in global crude oil price.

The crude oil that India buys into has averaged nearly 110 dollars per barrel all throughout March and first week of April as against $72-73 a barrel at the time of the last revision in diesel prices in June, 2010. Though of late there is slight moderation in global crude oil price analysts project that under no circumstances the global crude oil price would fall below $90 per barrel. As per an estimate OMCs till recently have been incurring a loss of nearly Rs 4.5 per litre of petrol with the global crude oil price hovering around 110 dollars per barrel.

They are incurring a loss of nearly Rs 15.79 per litre of diesel, Rs 24.74 per litre on kerosene and Rs 297.80 per 14.2-kg LPG cylinder.