Oil Minister meets FM to increase fuel prices

11 Jun 2011 Evaluate

The Petroleum Minister S Jaipal Reddy on June 10, 2011 met Finance Minister Pranab Mukherjee to discuss the issue of rising financial losses of public sector oil marketing companies (OMCs). Currently, OMCs are sitting on high borrowing because of a log in release of government compensation and revision in fuel prices. S Jaipal Reddy said, “I am concerned about the increasing under-recoveries (revenue losses) of oil marketing companies (OMCs). Everyday, OMCs are incurring under-recoveries of about Rs 450 crore,”

An empowered group of ministers (EGoM) chaired by Finance Minister, which makes decision on revision in price of diesel, kerosene and cooking gas, has not met since June last year, even though crude oil prices have spiraled by about 50%. The EGoM was originally scheduled to meet on May 11, but was postponed at the last moment. A second meeting was slated for June 9 but it did not take place. The new day of the next meeting is yet to be decided.

The OMCs purchase crude oil at market rate and they sell diesel, kerosene and cooking gas at government-subsidized price, because of this mismatch between buying and selling price, OMCs are making loss of Rs 450 crore a day. At these rates, companies may end up the present fiscal year with an all time high loss of Rs 165,000 crore. Presently, OMCs incur revenue loss of Rs 12.64 on every litre of diesel, Rs 26.16 on every litre of kerosene and Rs 381 for every LPG cylinder.

Oil Ministry is seeking for an Rs 3 to Rs 4 litre hike in diesel, and Rs 20 to Rs 25 per cylinder increase in LPG. The last increase in prices of these three products was taken in June last year when crude was ruling around $72 per barrel. Crude oil has averaged $110 barrel this month. In June 2010, diesel price was increased by Rs 2 per litre, kerosene by Rs 3 per litre and LPG by Rs 35.