Case for petrol price hike

Crude reality

New Delhi, Sept. 6: State-owned oil firms are mulling a hike in petrol prices as revenue loss mounts to about Rs 3 a litre.

However, a final decision on the amount of the hike would be taken after working out the average price of crude during the first fortnight of this month.

Industry sources said oil firms, which were incurring a loss of around 40 paise per litre by the end of August, are now suffering a loss of about Rs 3 per litre.

The Indian basket of crude has shown an upward movement since August-end, when the average price was $107.24 per barrel. It has increased to $109.37 a barrel till Monday.

Global crude prices have been volatile with Brent staying above the $100-mark in the past one quarter. The Indian basket comprises Oman/Dubai crude oils for sour grade and Brent for sweet grade.

The sources said the oil firms would wait for the Parliament session to end before taking a call on petrol prices.

As oil firms would not be compensated by the government for the revenue loss from petrol, which is a deregulated product, they have no option but to pass on the loss to consumers.

The current session of Parliament is to end on September 8.

Deregulation has resulted in oil marketing companies pricing the fuel according to the global movement of crude, leading to sharp increases in petrol prices.

Since the deregulation in June last year, petrol prices in Calcutta have increased from Rs 51.63 per litre to Rs 68.01 a litre, including the sharpest ever increase of Rs 5 a litre in May.

Apart from petrol, state-owned oil firms are incurring a revenue loss of Rs 4.57 on every litre of diesel, Rs 23.26 per litre of kerosene and Rs 267 per domestic LPG cylinder.

Oil ministry sources said the government might not hike diesel prices as it could add to the inflationary pressure in the economy.

However, the proposal of limiting the number of subsidised domestic gas cylinder per year could be taken up by the ministerial panel soon.