JOIN USThe Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is being convened soon to discuss a combination of a price hike and a reduction in government duties.
"While we have been pushing for an early EGoM meeting for long, even the Finance Ministry is now keen on a meeting soon," he said.
The Oil Ministry is pushing for the burden arising from the rise in crude oil prices to be equitably shared between consumers, the government and state-owned companies, he said.
State-owned oil firms currently lose Rs 15.44 per litre on the sale of diesel.
One-third of this will have to be passed on to consumers in stages, while a similar amount will have to be borne by the government by way of either providing a cash subsidy or reducing customs and excise duty. The remaining would be absorbed by upstream firms like ONGC and the fuel retailers.
A similar formula would apply to the Rs 27.47 per litre loss on kerosene and Rs 381.14 under-realisation on the sale of every 14.2-kg domestic LPG cylinder.
The government, the ministry feels, should cut customs duty on crude oil to zero from the current 5 per cent and on diesel from 7.5 per cent to 2.5 per cent. Also, there should be a small reduction in excise duty.
With inflation at an uncomfortable 9 per cent, a hike in the retail price of diesel should be kept to the bare minimum, the official said.
Without these measures, Indian Oil, Hindustan Petroleum and Bharat Petroleum are together projected to lose Rs 166,712 crore in revenues on selling diesel, domestic LPG and kerosene rates at government-controlled rates, which are way below the market price.
Oil firms also appear to have applied the brakes on a hike in petrol price after inflation in May topped 9.06 per cent. Oil firms, which last month hiked petrol price by a steep Rs 5 per litre, are losing Rs 1.98 a litre on a commodity which was freed from government control last June.
Oil Minister S Jaipal Reddy has held meetings with Prime Minister Manmohan Singh and Mukherjee on early convening of a meeting of the EGoM, which is the decision-making body on fuel price revisions.
The EGoM has not met since June last year even though crude oil prices have spiralled upward by over 50 per cent. The basket of crude that India buys was worth around USD 70-72 per barrel in June last year, but the same averages USD 111.54 a barrel in June this year.
The official said IOC, BPCL and HPCL currently lose about Rs 490 crore per day on fuel sales.
The official said IOC, BPCL and HPCL are virtually living off borrowed money as current realisation on fuel sales is not sufficient to meet the cost of importing raw material (crude oil).
The Oil Ministry has been pushing for an increase in diesel, domestic LPG and kerosene rates and wants the government to muster the political will to take the hard decision.
The EGoM was originally scheduled to meet on May 11, but was postponed at the last moment. There was talk of an EGoM -- which comprises representatives of all major allies in the ruling UPA -- meeting on June 9, but the meet was never scheduled for that day.