The Centre will not compensate the oil marketing companies (OMCs) for the losses they incur on account of selling non-subsidised domestic cylinder below market prices. Sources indicated that the government is likely to leave it to the first to bear these temporary losses as is being done in the case of petrol, where price was decontrolled in June 2010.
The government on Thursday put on hold the R26.5 per cylinder hike on non-subsidised LPG after oil marketing firms announced the increase and uploaded the revision on their website.
With the proposed hike, the 14.2-kg domestic cylinder would have cost Rs 922 from R895.5 earlier in Delhi.
Earlier the Cabinet committee on Political Affairs (CCPA) put a cap on providing subsidised cylinder at six per household and above six the at market rate , which will be revised every month by the oil marketing companies. There is no restriction on the number of non-subsidised cylinders that a consumer buys beyond the six subsidised cylinders.
?Nowhere in the world dual pricing has helped the economy. The government should take a rational approach,? former oil secretary S C Tripathi said.
Despite the government decontrolling pricing of petrol, the OMCs do not have a free hand to increase or decrease the price according to the international prices.
Their problem was compounded by the finance ministry’s refusal to compensate companies for their losses on petrol sales.
?We are managing petrol as of now, similarly we have to manage LPG. At present, we can bear the situation but what will happen later needs to be seen after the ministry review meeting,? an senior official said requesting anonymity.
As the price of non-subsidised domestic cylinder is already very close to the market price, it is expected that oil companies would refrain from any cut in its retail prices when international product prices fall.
This would make up for the marginal loss that they might incur now. Already there is an expectation that the LPG prices may fall in coming days owing to gloomy economic outlook.