A hike in diesel and domestic LPG prices has been deferred for now following an intervention by Oil Minister Murli Deora who felt an increase now would add to already high prices of essential commodities.
Sources in the know said Deora during a visit to Kolkatta on December 25 impressed on Finance Minister Pranab Mukherjee, who heads a ministerial grouping on fuel prices, to defer a decision on rate hike just now to ease burden on common man.
Following this, the meeting of an Empowered Group of Ministers (EGoM), which was to meet on December 30, has been deferred indefinitely, they said.
Meanwhile in Chandigarh, Planning Commission Deputy Chairman Montek Singh Ahluwalia said diesel prices should be deregulated immediately.
Favouring linking diesel rates with global prices in view of mounting losses of state-owned oil firms, he said, "I think diesel prices need to be aligned with global prices as soon as possible... (raise in diesel) Prices cannot be delayed from what is happening in global world ... Delayed by a week or by two weeks (not a solution)."
The Finance Ministry had favoured raising fuel prices as a response to hardening of international crude oil rates to over USD 90 per barrel while Deora has preferred government subsidies to lessen burden on the common man.
Sources said diesel has a weightage of 4.67 per cent in inflation while LPG contributes 0.91 per cent. A hike now would further accelerate inflation, which is currently at 7.48 per cent.
Deora, they said, wants the government to make up for at least half of the Rs 68,361 crore revenue loss state-owned oil firms are likely to incur this fiscal on selling diesel, LPG and kerosene below cost.
The EGoM was originally scheduled to meet on December 22 but at the last moment was deferred to December 30. It has again been deferred without a new date being given.
Sources said the EGoM was to meet to consider at least a Rs 2 per litre hike in diesel price and Rs 30-40 per cylinder raise in LPG rates.
"A weak dollar and chilly weather in northern Europe and the United States that resulted in increased heating fuel demand have sent crude oil prices on an upward spiral," a source said.
The under-recovery (or the revenue oil companies lose) on diesel today stands at Rs 6.09 per litre, sources said.
Besides diesel, the oil firms lose Rs 17.72 per litre on PDS kerosene sales and Rs 272.19 on (14.2-kg) LPG cylinder.
The oil firms had earlier this month raised petrol price by Rs 2.94-2.96 a litre but the hike was short of Rs 3.5 a litre desired increase to make retail prices at import parity.
The government had in June this year freed petrol prices, but the state firms, which control 98 per cent of the retail market, continue to informally consult the oil ministry before revising prices.
Also, the government had decided to make diesel price market-determined in stages. "Freeing diesel prices at current crude prices is simply not possible," the source said.
"They are losing Rs 215 crore per day on the sale of the three products. Also, there are marginal under-recoveries on petrol," the source added.
EGoM Meeting on Diesel, LPG Price Hike Postponed
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