Brace to pay more for petrol, diesel and LPG

With the government struggling to foot the subsidy bill handed by oil marketing companies, a hike in price of petroleum products is imminent.

A decision to this effect may be taken as soon as the monsoon session of Parliament ends on Friday. The Ministry of Petroleum and Natural Gas has also moved a Cabinet note for an immediate hike in price of petrol, diesel, kerosene and LPG cylinders.

With global crude prices hovering around $115 per barrel, oil firms at present are losing close to Rs 5 on every litre of petrol, Rs 17 a litre on diesel, Rs 34 a litre on kerosene and Rs 347 on every cylinder of domestic cooking gas.

“The hike could only be in the realm of Rs 3-3.5 per litre for diesel and Rs 2 for petrol,” sources in the government said.

An official of a state-run oil company said the oil firms have asked for a hike in the price of petrol, diesel and LPG, in case the government is unable to extend the subsidy. Diesel, kerosene and LPG prices have not been revised since July 2011. The government will be required to fend for the losses incurred by the oil companies this fiscal, close to Rs 1,60,000 crore, if fuel prices are not hiked.

Besides, a ministerial committee authorised to decide on pricing of fuel has not been reconstituted after its previous head Pranab Mukherjee got elected as the country’s President. In absence of the Empowered Group of Ministers, the Oil Ministry has sent the proposal for price hike to the Cabinet Committee on Economic Affairs (CCEA).

The CCEA is likely to consider the proposal once it meets after the Monsoon Session of Parliament ends on Friday.

Although there is a sense of urgency in the oil and the finance ministries to raise the price of administered fuels, fear of a political backlash has prevented the government from cutting down on subsidies.

The whopping subsidy bill has also contributed to an enlarged fiscal deficit, which touched 5.8 per cent last year, throwing the government’s financial management out of gear.

The Oil Ministry has also proposed to cap the number of cylinders available to a household every year between four and six.