Oil minister Veerappa Moily on Tuesday announced a set of conservation measures aimed at saving around $5 billion on the country's fuel import bill, but ruled out diesel or LPG price hikes for now.
The fuel conservation campaign that will kick off from October 1 includes public awareness campaigns to reduce fuel consumption through the use of brand ambassadors like cricketer Virat Kohli and badminton ace Saina Nehwal.
Moily said that no proposal has been moved to the Cabinet for raising diesel rates beyond the 40-50 paise a litre monthly hike being implemented since January this year.
With the rupee depreciating sharply, under recoveries or the difference between the cost of producing fuel and the retail selling price has widened. State-owned oil firms are selling diesel at a loss of Rs 14.50 per litre, kerosene at a loss of Rs 36.83 per litre and LPG at Rs 470.38 per 14.2-kg cylinder.
In best-case scenario, if the rupee was to stay at 58 to a US dollar and global oil rates around $ 105 per barrel, the under-recovery this fiscal would be Rs 116,485 crore, said Moily.
In worst-case scenario, if the rupee drops to 62 and oil prices rise to $110, the under-recoveries would rise to Rs 159,385 crore.
However, the oil minister added that with the rupee averaging 60 to a dollar and oil at $105 per barrel, under recovery will stand at about Rs 128,976 crore.
This will be met by a government contribution of Rs 66,931 crore and another Rs 62,045 crore from upstream firms such as ONGC.
Analysts said the government has ruled out price hike as assembly elections in crucial states, Delhi, Rajasthan and Madhya Pradesh, are around the corner.