Government Hints at Hike in Fuel Prices

Union Petroleum Minister Murli Deora hinted on Monday that prices of auto and cooking fuels might be hiked following an inter-ministerial meeting on June 7 amidst surging under recoveries of the three public sector oil marketing companies – Indian Oil, HPCL and BPCL.

The minister said that a decision would be taken at the meeting of the empowered group of minister (EGoM) headed by finance minister Pranab Mukherjee. The group was formed to deliberate the recommendations of the Kirit Parekh committee and trace the contours of a sustainable fuel pricing policy amidst surging fuel subsidies.

Deora, after attending a meeting of the consultative committee of members of Parliament for the ministry of petroleum and natural gas, said that the under recoveries of PSU oil retailers were likely to touch Rs 20,000 crore for the first three months of current fiscal.

‘Some members suggested a fuel price hike as the oil companies are making heavy losses. We would not like to increase the prices, but, we import 80% of our crude oil requirements and the cost of imports is prohibitively high. It is only natural that international oil prices will have a decisive role to play in the domestic retail sale prices,’ Deora said detailing discussion held at the meeting. However, no final decision was taken at the meet.

Oil secretary S Sundareshan said that under-recoveries were set to cross last year’s levels. “The under recovery for April-June is projected to be Rs 20,000 crore compared with Rs 46,051 crore for the whole year 2009-10. There is a real possibility that the under recoveries will cross last year’s figures…All that can be said is that at the current price of crude, we require to increase the price of fuels, ‘ he explained.

Out of the total under recoveries of Rs 46,051 crore seen in 2009-2010, Rs 14,200 crore were contributed by the upstream companies like ONGC by providing crude at a cheaper price to the OMCs. Another Rs 26,000 crore was provided by the government as cash. The remaining Rs 5,621 crore has been absorbed by the OMCs. However, the government is wary of imposing too much burden on the OMCs as it can affect the long term energy security of the country.