Decision on fuel prices deferred

September 11, 2012 15:10

Decision on fuel prices deferred

NEW DELHI, Sep 11 (Agencies): A decision on a hike in fuel prices was deferred Tuesday as a meeting of the Cabinet Committee on Political Affairs (CCPA), scheduled for the evening, was postponed.

Sources said the meeting was called off as some members of the ruling alliance were not in favour of such a decision ahead of state elections later this year.

Earlier in the day, Petroleum Minister Jaipal Reddy said an increase in diesel, cooking gas and kerosene prices is “unavoidable” to reduce under-recoveries of oil marketing companies.

“As I have said before, painful and difficult decisions on price of oil products will have to be taken. Increase in price is unavoidable,” Reddy told reporters on the sidelines of an event here.

“To what extent can the consumers take it, is another matter.”

Reddy said he had circulated an updated note to the CCPA, headed by Prime Minister Manmohan Singh, detailing the financial stress created by the rise in crude prices and fall in the value of rupee against the US dollar.

State-run oil marketing companies are losing Rs 550 crore per day on under-recoveries as a result of higher crude prices in the global markets.

Their losses on sales are at the rate of Rs 17 per litre on diesel, Rs 32.70 per litre on kerosene and Rs 347 per cylinder on cooking gas.

Reports, meanwhile, said prices of oil jumped near the highest level in a week amid speculation that countries like the US and China will announce economic stimulus measures to pep up growth.

Indian Oil chairman RS Butola said oil marketing companies were currently losing nearly Rs 6 per litre on petrol sales.

“There is a need to raise petrol prices. We are in consultations with our colleagues at other oil marketing companies and stakeholders,” Butola said.

Though petrol prices are freed from administrative control since June 2010, the OMCs consult the government before taking any decision on the price front.

The finance ministry also supports the petroleum ministry`s stand on cutting the subsidies on petroleum products as the move would lower the government`s subsidy burden and improve the country`s fiscal outlook.

With the rising global prices of crude oil and hardening of other commodities, it is feared that the fiscal deficit could breach the budget estimate of 5.1 per cent of gross domestic product for the current fiscal.

At the end of the day, Reddy proved himself prescient.

“If it (price increase) is taken up today (Tuesday), which is not very likely, some decisions may be taken… if it is not taken up today, decision will be postponed,” he had said.

September 11, 2012 15:10