Hike in petrol, diesel prices likely after Friday

An increase in petrol, diesel, domestic cooking gas (LPG) and kerosene prices looks "imminent" after the Finance Ministry said it has no money to provide for fuel subsidy.

"This (hike) is imminent. There is no question of holding back now," a top oil ministry official on Tuesday.

In all possibility, prices may be increased after the current monsoon session of Parliament ends on Friday.

Diesel, domestic LPG and PDS kerosene rates have not been changed since June 2011 even though cost of production has soared 28 per cent. State-owned fuel retailers are losing Rs 560 crore per day on sale of diesel and cooking fuel, and are forced to resort to short-term borrowings to meet funds needed for importing crude oil (raw material).

Borrowings of the three fuel retailers have shot up to Rs 1,57,617 crore at end of June from Rs 1,28,272 crore as on March 31.

Besides, they are losing close to Rs 5 per litre on petrol, a fuel that was decontrolled in June 2010 but rates of which haven't moved in tandem with cost.

"Finance Ministry says it is not left with funds to subsidise oil companies. Oil companies are jewels of India. They need to be saved at all cost. Governments come and go, but oil companies will be required to fuel the country," the official said.

Diesel is being sold at a loss of Rs 19.26 a litre , kerosene at Rs 34.34 per litre and domestic LPG at Rs 347 per 14.2-kg cylinder.

At current rate, the three firms are projected to lose Rs 1,92,951 crore in revenues in the financial year ending March 31, 2012.

The three firms reported a combined revenue loss of Rs 47,811 crore on fuel sales in the first quarter. Of this, upstream firms like ONGC made good Rs 15,061 crore by way of discount of crude oil they sell to them.

The oil ministry sought cash subsidy for the remaining Rs 32,750 crore but the Finance Ministry has not released any.

In the absence of the subsidy support, IOC reported the highest quarterly net loss by any Indian company at Rs 22,451 crore. HPCL posted Rs 9,249 crore net loss in April-June while BPCL reported a net loss of Rs 8,836 crore.

Oil firms would most likely post net losses even in the second quarter as the logjam in Parliament over coal block allocation has meant that supplementary demands for grants are not approved and no subsidy payout is possible till the next winter session of Parliament in November/December.