Oil price hike deferred again

Written by Agencies | New Delhi, May 31: | Updated: May 31 2008, 23:48pm hrs
A decision on raising prices of petrol, diesel and domestic LPG has been put off at least until next week after the UPA government leadership failed to give a clear signal on the issue.

Prime Minister Manmohan Singh and UPA Chairperson Sonia Gandhi discussed the Rs 225,040 crore revenue loss oil PSUs face without raising price of petrol, diesel, LPG and kerosene and duty cuts this fiscal on three occasions but failed to give a clear verdict.

Petroleum Minister Murli Deora, who had on Thursday said that Cabinet could meet on Saturday to take a view, left for Mumbai - his constituency - this morning after core group of UPA could not reach finality on the issue last night.

"Don't expect any action this week," an oil aide said.

The hitch, some say, is inflation rate climbing up to 45 month high of 8.1 per cent. Finance Minister P Chidambaram who has been vehemently opposing parting with any revenues by way of cut in customs and excise duty, is also believed to be against any hike in fuel prices as it would add to inflation.

"It appears, treatment may be finalised after the patient is dead," said an industry official referring to precarious situation of cash-strapped fuel retailers.

BPCL and HPCL would run out of cash to even import crude oil in July while IOC can sustain imports till September.

They lose Rs 16.34 a litre on petrol, Rs 23.49 on diesel, Rs 305.90 per LPG cylinder and Rs 28.72 per litre on kerosene.

Deora had also warned that a delay in decision would lead to fuel shortages across the country.

The state-run firms have already decided not to import any fuel even though domestic production of diesel was insufficient to meet a 20-22 per cent growth in consumption.

If the companies run out of cash to import crude, fuel supplies would drastically fall.

"Shortages are worse than price rise," Deora had argued at several meetings held over the past 10 days but a decision is still not in sight.