Deora asks PM to form committee for freeing fuel prices

IOC, BPCL and HPCL are projected to lose Rs 87,440 crore on selling petrol, diesel, LPG and kerosene below cost in FY2011 and in the absence of clear signals from the government on how these would be made up, Deora is desperately looking for viable solutions.

One of the options is to free auto fuel prices from government control, while revenue loss on domestic LPG and kerosene could be made up by upstream firms like ONGC.
Sources in the know of the developments said Deora has written to the Prime Minister Manmohan Singh seeking constitution of an Empowered Group of Ministers (EGOM) to decide on freeing petrol and diesel prices.

Decontrolling auto fuel prices would mean a hike of Rs 6.68 per litre in the rates for petrol sold in Delhi and a Rs 5.81 per litre increase in diesel rates.
Sources said the EGOM may decide if the hike necessary to take domestic retail prices to international parity should be done in one or more installments.
The Prime Minister's Office has so far not responded to the demand.

The petroleum ministry is keen that petrol and diesel prices are freed and wants a moderate hike in the price of LPG, which is being sold at a loss of Rs 265.27 per 14.2-kg cylinder. On PDS kerosene, oil firms lose Rs 18.42 per litre.
Sources said the three retailers lost Rs 47,960 crore on selling fuel below cost in the 2009-10 fiscal and this year, the revenue loss was expected to widen to Rs 87,440 crore.

The government has not yet said how it will make up for the projected losses in this fiscal.
There was an agreed formula to share under-recoveries for 2009-10, but there is no word for the current year, they said.

In FY2010, the losses on petrol and diesel were to be met by upstream firms like ONGC and the government was supposed to shoulder the under-recovery on cooking fuel. However, the government has not kept its part of the deal.

Of the Rs 29,353 crore revenue loss in the April-December period, upstream firms contributed Rs 8,364 crore to cover for the entire shortfall on petrol and diesel. But in the case of the Rs 20,989 crore loss on LPG and kerosene in the first nine months, the finance ministry has provided only Rs 12,000 crore.

Besides the Rs 8,989 crore uncovered amount in the April-December period, about Rs 12,000 crore of revenue loss on LPG and kerosene in the January-March quarter remains uncovered.