While oil minister Veerappa Moily has written to Prime Minister Manmohan Singh making a case for a large hike in prices of various petroleum products, oil marketing companies on Saturday effected a routine hike in prices of diesel by 50 paise per litre and petrol by R2.35 per litre. Non-subsidised LPG rates were also hiked.
A bigger hike in prices of fuels — LPG and diesel — is expected after the current session of Parliament ends on September 6.
Moily had written to the PM to take steps to tackle a record R180,000 crore of losses arising from a dipping rupee and surging oil rates. The oil minister, who had on Thursday met finance minister P Chidambaram on the issue, on August 30 wrote to Singh, saying that without a price increase the government will have to shell out a record R97,500 crore to subsidise diesel and cooking fuel.
“If the present position persists, total under-recovery (revenue loss) would reach a level of R180,000 crore in the current fiscal, compared to R161,000 crore during 2012-13,” he wrote.
A 25% drop in rupee value has resulted in losses on diesel sales widening to R10.22 per litre despite prices being raised by 50 paise a litre every month since January. This, coupled with R33.54 a litre loss on kerosene and R412 on sale of every 14.2-kg LPG cylinder, translates into a total revenue loss of R180,000 crore this fiscal, he said, adding that even after upstream firms like ONGC chip in R70,500 crore, a gap of R97,500 crore would be left.
Moily said a one rupee increase in diesel price will cut losses by R4,522 crore in remainder of the current fiscal, while a R3 per litre increase would trim losses by R13,565 crore. If rates are raised by a one-time R5 per litre, the losses would be cut by R29,390 crore.
The hikes proposed are one-time and outside monthly revision in rates of 50 paise happening since January.
Similarly, a R50 per cylinder increase in LPG rates would trim cooking gas losses by R2,604 crore. A possible R2 per litre hike in kerosene price would