News Hour- Oil companies to raise petrol prices next month; govt to review diesel rates

NEW DELHI: State refiners are preparing to raise petrol prices next month if they are not compensated for selling the fuel below market rates for political reasons while the government is considering reviewing diesel,kerosene and cooking gas rates soon, which could see their prices going upward, government and industry officials said.

"We will take a final call by end of March when we close accounts for the year," Indian Oil chairman RS Butola told reporters. He said state-run oil marketing firms could not sustain revenue loss on selling petrol below market rates and the government must compensate them for 2011-12.

OMCs are demanding a compensation of about Rs 4,500 crore for keeping petrol prices below market rates since December under implicit direction by the government, which did not want any price hike during assembly elections in five states.

Speaking to media persons at the 7 ^thAsia Gas Partnership Summit, oil minister Jaipal Reddy said the prices of diesel, kerosene and cooking gas would be "relooked."

Reddy refused to give any time frame for the price review. The government regulates prices of diesel, kerosene and cooking gas through an empowered group of ministers (EGoM), which is chaired by finance minister Pranab Mukherjee.

The government has no immediate plan to deregulate diesel prices, Reddy said. The Cabinet had taken an in-principle decision in June 2010 to deregulate diesel along with petrol but a formal order on freeing diesel rates could not be issued under political pressure. UPA government's allies do not want diesel prices to be deregulated that could ignite inflation.

"We are not contemplating diesel deregulation currently," Reddy said.IOC, BPCL and HPCL are currently incurring a revenue loss of Rs 14.73 a litre on diesel, Rs 30.10 a litre on kerosene and Rs 439.50 on a cylinder of cooking gas.

Reddy ruled out any reversal of petrol price deregulation, which is often controlled by the government albeit in a tacit manner. "There is some kind of discontinuity in petrol deregulation but we do not plan to bring it under regulation," he said.

Oil ministry officials said it was expecting Rs 15,000 crore more to compensate refiners for Jan-Mar 2012. However, the ministry has sought more compensation for the financial year 2011-12 from the finance ministry, officials said. The government had made a revised estimate of about Rs 68,400 crore as fuel subsidy for 2011-12 due to a surge in international crude oil prices. Companies have so far received Rs 45,000 crore of government subsidy in the current fiscal.

(Source- http://economictimes.indiatimes.com)