Oil ministry lobbies for fuel price hike

The new Euro-IV auto-fuels were launched by Delhi Chief Minister Sheila Dikshit and Petroleum and Natural Gas Minister Murli Deora here Wednesday as they flagged off oil tankers of Indian Oil, Hindustan Petroleum and Bharat Petroleum companies from Bijwasan oil terminal via video conferencing.

The government indicated that there is likely to be an increase in fuel prices, as under-recoveries are expected to zoom unless there was a “hard decision”.
"Under-recoveries will rise if we do not take very, very hard decisions soon," Petroleum Secretary S. Sundereshan said at the launch function.
He said that the revenue loss from under-recoveries this year was Rs.45,000 crore, which could increase to Rs.70,000 crore by next fiscal unless a price hike was effected.

State oil firms are currently losing Rs.6 per litre on petrol, Rs.4 per litre on diesel, Rs.17 per litre on kerosene and Rs.267 per cylinder of cooking gas.
The Euro-IV grade petrol and diesel would add another 41 paise per litre on petrol and 26 paise per litre on diesel to these under-recoveries.
The secretary strongly indicated that this increase in cost should be passed on to consumers. "Unless certain actions are taken, future will be very difficult,” said Sundareshan.

He said that abilities of upstream companies like ONGC and Oil India to share the burden of the oil marketing companies was limited. Similarly, the government may not be in a position to continue with the subsidy in the long term.
Sundareshan said a fuel price hike will not lead to increase in prices of essential commodities, rather he said that government borrowings to fund subsidies led to inflation.

The last hike took place after the union budget was presented Feb 27, after the government increased excise duty and restored duty on crude oil. At that time, the price of petrol and diesel had been increased by Rs.2.71 and Rs.2.55 per litre, respectively.
The Euro-IV grade fuel has an ultra-low sulphur content of 50 parts per million. After the 13 cities, Euro-IV fuel will be introduced in the rest of the country by October 2010.