Prime Minister Manmohan Singh on Tuesday gave his stamp of approval to the proposed increase in the price of petrol by Rs 2 a litre and of diesel by Re 1 a litre. The new prices are likely to be announced on Thursday after the Cabinet formally clears the proposal.
Sources in the PMO told FE that finance minister P Chidambaram and petroleum minister Murli Deora met the PM on Tuesday morning and hammered out a compromise formula on the price hike.
It was also decided at the meeting that there would be no reduction in the excise duty on petrol or diesel. Instead?much against the petroleum ministry?s wishes?it has been decided to further increase the amount of oil bonds issued to state-owned oil marketing companies.
Currently, oil-marketing firms are issued oil bonds based on 42.7% of their under-recoveries on the domestic sale of petroleum products. The proposal to increase the quantum of oil bonds came from the finance minister.
Even though the petroleum ministry was opposed to the idea, Deora agreed to Chidambaram?s suggestion, forgoing the demand of his ministry for a Re 1 reduction in excise duty on auto fuels along with a cut in customs duties on crude oil and petro products.
Significantly, the sources said the PM felt that such a marginal increase in prices was inadequate to counter the impact of surging global crude prices. However, Deora is learnt to have pressed for keeping the price hike minimal. ?Given the current political pressures, the PM has agreed to the price hike proposed by Deora,? an official said.
Currently, petrol is sold at Rs 43.52 a litre (in Delhi) and diesel at Rs 30.48. Following the price revision, petrol will be sold at Rs 45.52 (in Delhi) and diesel at Rs 31.48. Even though oil companies lose Rs 331 on every cylinder of LPG, sources said there would be no increase in the price of cooking gas.
Petrol and diesel prices were last raised in June 2006 when crude was at $67 a barrel. It is now at $92 a barrel. LPG prices were last raised by Rs 20 a cylinder in November 2004 when crude was at $34 a barrel. Kerosene prices have not changed since 2002, when crude was at $23 a barrel.
Indian Oil, Bharat Petroleum and Hindustan Petroleum lose Rs 10.57 on every litre of petrol, Rs 11.56 a litre on diesel and Rs 19.89 a litre on kerosene.
