The government will roll back the Rs 4 a litre hike in petrol prices and Rs 2 a litre increase in diesel rates if international crude oil prices stabilize between $50 and $60 a barrel, Oil Minister Murli Deora said.
"Yes, we will cut prices if crude prices stabilise for sometime between $50 and 60 per barrel," he said here.
The Government had last week raised petrol and diesel prices citing spike in international crude oil prices to $70 a barrel.
International rates have eased since. The basket of crude oil India buys was at $61.58 a barrel yesterday but the average for July was $65.34 per barrel. The July average was certainly lower than $69.12 a barrel average price of Indian basket of crude for June.
Deora said the price rise was unavoidable as India was dependent on imported crude oil to meet 75 per cent of its domestic oil needs. Indian Oil, Bharat Petroleum and Hindustan Petroleum were projected to lose Rs 4,870 crore in revenues every month on selling petrol, diesel, domestic LPG and kerosene below the cost.
"To cover this (revenue loss), the retail prices were required to be increased by Rs 6.94 per litre on petrol, Rs 4.11 a litre on diesel, Rs 96.68 per LPG cylinder and Rs 16.01 per litre on kerosene," Deora said. "However, the government increased the price of petrol only by Rs 4 per litre and of diesel by Rs 2 a litre."
The price hike had been necessitated as international prices of crude oil had jumped 75 per cent from $40 a barrel in December to $70 per barrel. The monthly revenue loss on sale of petrol and diesel came to Rs 2,800 crore and urgent cash flows were needed to keep the capital expenditure plans on track, Deora said.
The price increase will reduce the revenue losses by about Rs 13,000 crore during 2009-10. "Even after this increase, oil PSUs are projected to suffer a burden of around Rs 27,000 crore on the sale of petrol and diesel," he said.
Deora said the Government has not increased the retail price of kerosene and diesel and a projected Rs 30,000 crore subsidy burden would have to be borne by the Government on this account.
He said since 2003-04, the Government has issued oil bonds worth Rs 142,203 crore to oil marketing companies IOC, BPCL and HPCL to keep retail selling prices below the international rates.
Upstream firms like ONGC contributed another Rs 101,285 crore while the three retailers absorbed Rs 55,734 crore of losses instead of passing the rise in crude oil prices to consumers.
As a result of keeping retail prices below cost, the cash flows of three oil-marketing companies were affected, compelling them to borrow heavily to meet their cash flow requirements, Deora said.
"OMCs' borrowings ballooned to Rs 107,115 crore on December 31, 2008, before falling to Rs 88,900 crore in March 2009, consequent to the fall in international oil prices and issue/liquidation of oil bonds," the minister added.
During 2008-09, the OMCs' interest burden increased to Rs 8,201 crore as against Rs 3,016 crore during the previous year, making a serious dent on their profitability.
In the same year, even after ensuring full compensation for their revenue loss on fuel sales (upstream assistance of Rs 32,000 crore and oil bonds of Rs 71,292 crore) the three public sector OMCs barely escaped going into losses, he said.