PM hints at oil burn; air fares up
Government emissaries moved throughout Monday between the Prime Minister?s Office, petroleum and finance ministries, besides the Planning Commission, to work out a compromise formula to avert a massive rise in consumer fuel prices. Within hours of Prime Minister Manmohan Singh talking tough to prepare grounds for a rise in oil prices, civil aviation minister Praful Patel said he will meet Singh to find out ways to moderate the impact of the rise in jet fuel prices on domestic airlines while left parties threatened to withdraw support to the government if there were any rise, especially in LPG and kerosene prices.
?We cannot allow the subsidy bill to rise any further. Nor do we have the margin to fully insulate the consumer from the impact of world commodity and oil price inflation,? the Prime Minister said at Assocham?s annual meeting. Singh asked for a wider political consensus on the issue, saying the government could insulate poor people ?up to a point? and economic pricing of oil was essential to sustain growth. But key officials involved in the process said the options were limited to a round of duty cuts and further build up of oil bonds if the price rise was to be kept minimal. At current global oil prices, of around $130 a barrel, India?s oil subsidy bill may shoot up three times to 2.2% of the GDP this year. A decision on hiking fuel prices is now expected only by Wednesday or Thursday.
The losses of state-run oil marketing companies have already mounted to Rs 650 crore a day. Petroleum minister Murli Deora, who has been pushing for a Rs 10 a litre hike in petrol, Rs 5 per litre increase in diesel and Rs 50 per cylinder rise in LPG prices, has readied a note for the consideration of the Cabinet, that by indications may take place on Wednesday.
As a result of the 18.5% rise in prices of jet fuel made on Saturday, Jet Airways, Kingfisher Airlines and Simplifly Deccan on Monday announced a fare hike effective from June 3. Air India has already raised its fuel surcharge by Rs 300 on short haul routes and Rs 550 on long haul routes. Jet has hiked fuel surcharge by Rs 150 for up to 750 km travel and by Rs 250 for more than 750 km travel, Kingfisher by Rs 300 for sectors up to 750 kms and Rs 550 for sectors over 750 km. Simplifly Deccan, in which Kingfisher acquired a majority stake in 2007, will also hike fares in line with the latter.
Patel is scheduled to make a presentation to Prime Minister and finance minister this week on the impact of ATF price hike on the financial health of domestic carriers.