The government appears to have developed cold feet on increasing diesel and cooking gas (LPG) prices, with Oil Minister M Veerappa Moily today saying there was no proposal to hike rates just yet.
Moily insisted that no proposal has been moved to the Cabinet for raising diesel rates beyond the 40-50 paise a litre monthly increase, which has been implemented since January this year.
"We have to take decision objectively and in the interest of the consumer... As on today, there is no proposal to increase price of diesel except for what the Cabinet had authorised in January," he told reporters here.
With rupee depreciating sharply this fiscal, the difference between the cost of producing fuel and the retail selling price has widened. Diesel is currently being sold at a loss of Rs 14.50 per litre.
Besides, state-owned oil firms are also losing Rs 36.83 per litre on kerosene sold through ration shops and Rs 470.38 per 14.2-kg cooking gas (LPG) cylinder.
The ministry had been mulling hiking diesel price by Rs 3-5 per litre, kerosene by Rs 2 and LPG by Rs 50 per cylinder to cut losses by Rs 20,000 crore.
"We are concerned about the under-recoveries (the difference between cost and retail selling price). We are working on other alternatives to reduce the under-recoveries," he said.
When asked if the price increase was off the table, Moily said: "If you ask me today, there is no proposal. But we live in a dynamic environment."
The government appears to be wary of the political impact the increase in prices will have just ahead of assembly elections in four crucial states, including Delhi, Rajasthan and Madhya Pradesh.
Moily said about Rs 128,976 crore under-recovery is likely on sale of diesel, LPG and kerosene this fiscal, which will be met by government cash subsidy dole of Rs 66,931 crore and another Rs 62,045 crore coming from the upstream firms like ONGC.
Moily said the rupee, which had averaged at 58.38 to a US dollar in 2012-13, has depreciated now to 60.03.
If rupee was to stay at 58 to a US dollar and global oil rates stabilise around $105 per barrel, the under-recovery this fiscal would be Rs 116,485 crore. However, if the rupee drops to 62 and oil prices rise to $110, the same would rise to Rs 159,385 crore.
In the most likely scenario of rupee averaging 60 to