The Group of Ministers (GoM) is to consider a marginal hike in petrol and diesel prices this week.
It is also contemplating to deduct excise duty on auto fuels to cut the Rs 78.40 billion loss public sector oil firms incur every month on selling fuel below cost. It is also recommending to slash sales tax by states.
`A hike in fuel prices, duty rationalization and raising oil quantum of oil bonds are among the options that the GoM will consider when it meets for the first time on December 14,` Petroleum Secretary M S Srinivasan told reporters at New Delhi on Monday.
However, there were indications that the GoM on commodity pricing including fuel rates, headed by External Affairs Minister Pranab Mukherjee, may defer its meeting to later this month or even to early January.
Big giants such as Indian Oil, Bharat Petroleum and Hindustan Petroleum are projected to lose Rs 697.53 billion on sale of petrol, diesel, LPG and PDS kerosene as Government has not allowed them to raise prices in line with the price of imported crude.
Petrol is being sold at a loss of Rs 8.74 a litre, diesel at Rs 9.92 per litre, kerosene Rs 20.53 a litre and LPG at a loss of Rs 256.35 per cylinder.
The Indian basket of crude oil currently is higher by around USD 22 – 23 a barrel over the international price prevailing at the time of last increase in petrol and diesel prices on Jun. 06, 2006, Srinivasan said.
An increase of one Rupee a litre in petrol price will cut under – recoveries by Rs 900 million a litre and the same on diesel will slash the loss by Rs 3.6 billion a month.
If the center increases kerosene price by the same amount, then losses will reduce by Rs 950 million a month and if LPG prices were raised by Rs 10 a cylinder, they would come down by Rs 580 million per month.
Also a reduction in excise duty by Re 1 per litre on petrol and diesel would reduce the under-recoveries of oil companies by Rs 1,380 crore and Rs 5,270 crore respectively.
Moreover, the cabinet had decided to compensate oil companies of 42.7 % of their under-realization on fuel sales through oil bonds. Accordingly, we hope the finance ministry will give about Rs 290 billion worth of oil bonds, ` he said, adding one-third of the revenue loss would be met by upstream companies like ONGC.