Petroleum Minister Veerappa Moily has written to the Prime Minister and Finance Minister seeking a steeper fuel price hike. On Saturday, state-run oil firms had hiked petrol and diesel prices by Rs 2.35 and 50 paise per litre respectively (without taxes). (Read: Petrol price hiked by Rs. 2.35 per litre, diesel by 50 paise)
Diesel prices may see a one-time hike of Rs. 3-5 per litre, kerosene of Rs. 2 and LPG of Rs. 50 per cylinder as Oil Minister M Veerappa Moily urged Prime Minister Manmohan Singh to take steps to tackle a record Rs 180,000 crore of losses arising from dipping rupee and surging oil rates, PTI said quoting Mr Moily's letter to the Prime Minister.
A 25 per cent drop in rupee value has resulted in losses on diesel sales widening to Rs. 12.12 per litre despite prices being raised by 50 paise a litre every month since January.
The rupee, which plays an important role in the price of fuel as oil companies buy crude in dollars, hit an all-time low of 68.85 on August 28. It has fallen over 15 per cent in the last three months and closed at 66.70 per dollar on Friday.
India imports nearly 80 per cent of its oil requirements and a one-rupee depreciation raises the oil bill by nearly Rs 8,000 crore.
A decision on further hikes is expected after the current session of Parliament ends, PTI said. Earlier this week, Prime Minister Manmohan Singh had said in Parliament that the government will do whatever is necessary to contain the fiscal deficit to 4.8 per cent of GDP this year.
"The most growth-friendly way to contain the deficit is to spend carefully, especially on subsidies that do not reach the poor, and we will take effective steps to that end.
The easy reforms of the past have been done. We have the more difficult reforms to do such as reduction of subsidies...," the Prime Minister had said.
A sharp hike in diesel prices will be hugely unpopular with less than a year to go before general elections. It will also stoke inflation leading to possibly higher interest rates, something that will weigh on the economy.
Latest GDP data, unveiled on Friday, showed India's growth in the April to June quarter was the slowest in last four years. Slowing growth and rising inflation will put further pressure on the rupee, which is already the worst performing Asian currency this year.
(With inputs from PTI)