The government today deferred a decision on freeing petrol prices even as Oil Minister Murli Deora will go into a huddle with Finance Minister Pranab Mukherjee to decide on a subsidy sharing formula.
Mukherjee's repeated refusal to compensate state-run fuel retailers for
losses on LPG and Kerosene led Deora to take a proposal for freeing
petrol prices and gradually increasing diesel rates to an oil sector
review meeting called by Prime Minister Manmohan Singh.
Freeing petrol price would have resulted in a Rs 3 per litre increase in rates.
While a decision on the proposal was put on hold for more
consultations, Deora is scheduled to meet Mukherjee tomorrow morning to
sort out issue of compensation to IOC, BPCL and HPCL, sources said.
Government has not allowed Indian Oil, Bharat Petroleum and Hindustan
Petroleum to raise petrol, diesel, domestic LPG and kerosene prices
despite cost of raw material (crude oil) rising to USD 82 per barrel.
The three firms are projected to lose Rs 44,300 crore in revenues on
fuel sale this fiscal as domestic rates are pegged at a crude price of
around USD 66 a barrel.
The three firms currently sell petrol at a loss of Rs 3.06 a litre,
diesel at Rs 1.56 per litre, kerosene at Rs 17.23 per litre loss and
LPG at a discount of Rs 299.01 per cylinder. MORE
IOC, BPCL and HPCL are projected to lose about Rs 31,700 crore on LPG
and kerosene this fiscal and Deora is seeking either cash or oil bonds
to keep the firms afloat.
Planning Commission Deputy Chairman Montek Singh Ahluwalia and former
Planning Commission member Kirit S Parikh, who heads an expert
committee on fuel pricing, also attended the deliberations.
Officially the meeting has been called to take stock of the petroleum
sector, especially the financial position of PSU oil retailers, the
The Government had failed to provide the promised oil bonds to make up
for the revenue loss on LPG and kerosene, in the absence of which HPCL
and BPCL reported losses in Q2 while IOC barely scrapped through.
Besides the three, private fuel retailers Reliance Industries, Essar
Oil and Shell have also sought freeing of petrol and diesel prices to
give them level playing field. Sources said the meeting discussed the
current mechanism to share revenue losses incurred by the state-owned
oil retailers with upstream companies like ONGC and the government.
Besides reviewing both upstream and downstream sectors, the meeting
also held preliminary discussions on the findings of the Parikh
committee, he said.
The group, which is examining government's pricing policy for petrol,
diesel, LPG and kerosene, is likely to give its final recommendations
on a sustainable pricing system by end of this month.
The Government had, earlier this year, said that it will issue oil
bonds to compensate for the revenue lost by IOC, BPCL and HPCL on
selling LPG and kerosene. The revenue they lose on selling petrol and
diesel is made up by upstream firms Oil and Natural Gas Corp (ONGC) and
Oil India Ltd.
However, the finance ministry has not issued any bonds in the first
three quarters and so the subsidy mechanism has to be reviewed now.
Heads of ONGC, IOC, HPCL, BPCL, OIL and GAIL India Ltd are likely to attend the meeting.
Decision on Freeing Oil Prices Put on Hold
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