Petrol prices may go up this week; diesel, LPG rates may follow

New Delhi - 10 May 2011: The government may hike diesel and domestic LPG rates next week while an increase in petrol prices may happen later this week.

"The Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee (on fuel price hike) was to meet tomorrow evening. It has been put off," Oil Minister S. Jaipal Reddy told reporters in New Delhi.

The EGoM was to meet on Wednesday to consider raising the diesel price by Rs. 3-4 a litre and domestic LPG rates by Rs. 20-25 per cylinder.

"It has been postponed to accommodate some ministers...It could be anytime on (May) 17 or 18," he said.

State-owned oil firms, however, are likely to get the go-ahead to raise the price of petrol, which they have not revised since January on informal 'advice' from the government in view of Assembly elections in five States.

"Petrol prices may be raised as early as Thursday-Friday night," an official said, adding a steep hike of up to Rs. 3 per litre of petrol is on the cards.

The government had freed petrol prices from its control last June, but State oil firms continue to be guided by informal advice from the government.

The hike needed to take petrol prices to international parity is about Rs. 8.50 per litre, but the entire burden will not be passed on to consumers in one go.

"Oil companies will be asked to stagger the hike over a couple of months," the official said.

Mr. Reddy said the day EGoM meets on fuel prices, a separate Group of Ministers (GoM) that is vetting London-listed Vedanta Resources' $9.6 billion acquisition of Cairn India, may also meet.

"I think when the next date is fixed on that day itself we will deal with both questions - the question of under-recoveries of oil companies and the question of government approval to Cairn-Vedanta deal," he said.

State-owned Indian Oil, Bharat Petroleum and Hindustan Petroleum currently lose Rs. 16.17 a litre on diesel and after adding local sales tax or VAT, the desired increase to make rates at par with international prices is Rs. 18.19 a litre.

Besides petrol and diesel, the three State oil firms lose Rs. 29.69 a litre on kerosene and Rs. 329.73 per 14.2-kg domestic LPG cylinder.

Officially on the EGoM's agenda was ways of mitigating the over Rs. 180,000 crore revenue loss State-owned oil firms have projected in 2011-12 on selling diesel, domestic LPG and kerosene at current rates.

The three firms will "at current international crude oil prices lose Rs. 180,208 crore in revenues on selling diesel, domestic LPG and kerosene below their imported cost in the 2011-12 fiscal," the official said.

Source: PTI