Prices of petrol and diesel are likely to be hiked this week, two sources in the state-owned oil firms told NDTV Profit.
While diesel may get dearer by 50 paise in line with the Oil Minister's mandate to increase the price by 40-50 paise per litre every month until the losses from selling the nation's most used fuel at subsidized rates have been completely wiped out, petrol prices may increase by close to Re 1 per litre with international crude prices refusing to fall below $110 per barrel.
"The benchmark international prices of gasoline (petrol) firmed up in the last fortnight. So, the quantum of a petrol price hike in India will be in the vicinity of Re 1 per litre," a third source said. The Indian crude basket (the benchmark of prices averaging various types of crude imported into India) has remained above $112 per barrel.
Indian Oil, the country's largest state-owned refiner, will review diesel prices on Friday or Saturday, said news agency Reuters quoting chairman R.S. Butola.
The price hikes, should they happen, will be the 20th for petrol since the fuel was deregulated. Under deregulation, oil firms are free to decide the quantum and the frequency of a price hike. Since petrol prices were decontrolled in June 2010, they have been revised 27 times (increased 19 times and decreased eight times).
The last revision in petrol and diesel prices happened on January 17 when the price of petrol was reduced by about 29 paisa per litre and that of diesel was hiked by about 50 paisa per litre. Earlier that day, the Union Cabinet permitted the three public sector oil marketing firms - IndianOil, Hindustan Petroleum and Bharat Petroleum - to revise diesel prices by a small quantum every month.
The oil firms lose about Rs. 450 crore every day from haviing to sell diesel, cooking gas (LPG) and kerosene at subsidized rates. For the full year, their total losses are estimated to be more than Rs. 1,50,000 crore. However, these oil firms get compensated for their losses from the Finance Ministry and their sister upstream PSUs such as Oil and Natural Gas Corporation, GAIL and Oil India.
In an effort to ease the burden of having to sell fuels at subsidized rates, the Finance Ministry earlier this week sent letters of comfort to IndianOil, BPCL and HPCL, detailing a payout of Rs.25,000 crore in compensation.
Of the total amount, IndianOil will get Rs. 13,474.56 crore, BPCL Rs. 5,987.25 crore and HPCL Rs. 5,538.19 crore. The Finance Ministry has already given Rs. 30,000 crore in subsidy to the companies in the first two quarters.
The actual disbursement, based on the comfort letter of the ministry, will be made after Parliament has approved the supplementary demands for grants in the forthcoming Budget session.
India is largely dependent on imports for its fuel needs. It imports 80 per cent of the crude it refines, about 3.7 million barrels per day.
In order to minimize its dependency on imports by 2030, the Oil Ministry has proposed to set up a committee under Vijay Kelkar, former advisor to the Finance Ministry, which will submit a proposal in two months. Mr Kelkar also heads a committee on fiscal consolidation that had suggested an increase in fuel prices and the deregulation of diesel.
With inputs from Reuters