The government on Tuesday ruled out any immediate reduction in the domestic fuel prices?petrol, diesel and cooking gas (LPG)?and clarified that the price of crude oil that India imports has to stabilise at $61 a barrel levels before any cut in the domestic fuel prices is considered. The cut in domestic fuel prices is being talked about after the softening of global crude oil prices by over 50% in the past three months from $148 a barrel levels to around $72 at present. The price of the Indian basket of crude oil on Tuesday stood above $65 a barrel.
Interestingly, there is another compulsion before the government which is coming in the way of announcing a cut in the fuel prices. As elections have already been announced in six states (including Jammu and Kashmir), the government has to abide by the code of conduct laid down by the Election Commission before making any public interest announcement. Under a directive issued by the Election Commission to the Cabinet secretariat last year, the government has to seek the Commission?s permission before making any public interest announcements.
The directive was issued by the EC following agriculture minister Shard Pawar?s announcement on the issue of export subsidy for sugar mills, close to the Uttar Pradesh state elections in 2007, Pawar was pulled up by the EC and was even given a show-cause notice, as Uttar Pradesh is the one of the major hubs for sugar mills.
On his part, petroleum minister, Murli Deora ruled out any immediate reduction in petrol, diesel and domestic LPG prices. ?You will have to wait for that,? he told reporters when asked if fuel prices are likely to be cut. Even the finance minister, P Chidambaram, in reply to a discussion on the Supplementary Demands for Grants said, ?Reduction in crude oil prices has helped but not helped to the point where we can roll back the prices. Even at current levels of crude oil prices, there is an element of subsidy. Under-recovery has come down, but we are still not making any profit.?
However, Chidambaram assured that once the prices come down to the right levels, the government would take an appropriate decision. At the moment, he said, the need is to stimulate economy and RBI?s move to cut short-term lending rate, repo and mandatory deposit requirements of banks (CRR) are steps in that direction.
Chidambarm also said that inflation needs to be paid attention. ?I can see inflation is still high, but the benefits of decline in crude oil prices, decline in commodity prices will bear fruit in weeks and months to come,? he said.
While the decline in global crude oil prices had helped state-run OMCs?IOC, BPCL and HPCL?trim their losses on sale of petrol, diesel, domestic LPG and kerosene, the appreciation in value of rupee against the US dollar has wiped away some of the gains. The OMCs are still losing about Rs 280 crore per day on sale of petrol, diesel, domestic LPG and kerosene as government has not allowed them to align retail prices with cost of production.