Top government officials told FE, the combined impact of soaring global crude oil prices, duty changes in the budget and higher fuel specification works out to Rs 4.24 a litre for petrol and Rs 3.83 a litre for diesel. It has, however, not factored in the impact of higher global oil prices while proposing the price hikes.
Pending increase in petrol and diesel prices, under-recoveries of oil marketing companies, Indian Oil (IOC), Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and IBP are expected to touch Rs 950 crore for March 2005 alone. As oil PSUs are also holding back the prices of LPG and kerosene, their under-recoveries on these two subsidised fuels, post adjusting the nil customs and excise duties, are expected to be Rs 14,000 crore for the current fiscal.
The officials said the impact of duty changes in budget calls for a Rs 2.20 a litre increase in petrol and Rs 1.06 a litre in diesel. The impact of the auto fuel policy has been calculated at 30 paise a litre for petrol and 24 paise a litre for diesel.
As per the ministrys note for the Cabinet, while the cut in customs duty would lower petrol prices (existing price Rs 37.84 a litre) by about 75 paise a litre, the higher excise duties would increase them by Rs 2.44 a litre. This, together with the surcharge, will call for an increase of Rs 2.20 a litre (Rs 1.69 before excise and sales tax) at Delhi.
Similarly for diesel (existing price Rs 26.28 a litre), the customs duty cut will lower prices by 77 paise a litre while increase in excise will raise them by Rs 1.65 a litre. Adding the surcharge, it will mean an overall increase of Rs 1.06 a litre on account of budgetary changes alone.
In order to introduce higher specifications or the Euro-III fuels from April 1, the domestic refineries have already incurred Rs 10,600 crore while the ongoing projects require another Rs 11,800 crore.
As a result the Euro-III specification fuels would attract the higher cost and price effective from April 1 of about Rs 0.30 per litre for petrol and Rs 0.24 a litre for diesel, says the ministrys Cabinet note.