But in the absence of an Empowered Group of Minister's (EGoM) to discuss the issue of fuel prices, an increase in the price of diesel looks unlikely in the near future. The EGoM had in June 2010 decided in-principle to deregulate diesel prices, which causes 40 per cent of the losses/under recoveries.
Following the ascension of then finance minister Pranab Mukherjee, who headed the EGoM, to the President’s office, the panel was dissolved; it remains the only EGoM that has not been reconstituted in the wake of his exit.
“I'm not taking (proposal of fuel price hike to Cabinet) just now. I can't say when it will go, though I admit I should,” Reddy said.
Public sector oil firms—Indian Oil, Hindustan Petroleum and Bharat Petroleum—are currently bleeding Rs 13.65/litre on diesel, Rs 231/LPG cylinder and Rs 29.97/litre on kerosene. Petrol prices were deregulated last year and are no longer administered by the government.
Petroleum Secretary, G C Chaturvedi also said that under recoveries (losses) for the June quarter is about Rs.47,000 crore. He added that upstream state-owned oil firms - ONGC, OIL and GAIL - have compensated Rs.15,000 crore in first quarter, but a deficit of Rs.32,000 crore remains.
“We have asked for full Rs.32,000 crore compensation from finance ministry,” Chaturvedi said.
The petroleum minister said that in absence of the EGoM, “we will have to take the matter to Cabinet Committee on Political Affairs (CCPA) as was the case before.”
Like the EGoM, the CCPA has representatives of key allies like Trinamool Congress, DMK and NCP. “UPA allies need to be consulted (for any prices hike,” Reddy said.
Price of diesel, domestic cooking gas (LPG) and kerosene prices have not been raised since June 25 last year even though the cost of crude have spiralled and rupee has depreciated considerably against US dollar making imports even more costlier.
Without a fuel price hike, public-sector oil companies are estimated to have cumulative loss of Rs. 160,000 crore. But given a tight fiscal situation, the government is also hard-pressed to compensate state-owned oil firms.
“We will have to take many things into consideration (for fuel price hike). Inflation rate has to kept in mind. We are looking at it carefully. I can't at this point make a comment (on timing),” Reddy said.
Inflation is still above the Reserve Bank’s comfort level and any diesel price hike, which has cascading effect on commodity prices, will become difficult in a year when rainfall is estimated to be 21 per cent below normal.
The oil ministry has been contemplating sending a price hike proposal to the CCPA and leaving the decision to the Prime Minister, he said.
PSU oil firms raised petrol prices (which is not regulated by govt) last month by Rs 0.70/litre because of high international oil prices and depreciating Indian currency against US dollar.
Sources said that given the vice-presidential elections on August 7, followed by the monsoon session of Parliament, it may not be possible to raise the prices of diesel, domestic LPG and kerosene.