Another round of petrol price hike on cards
New Delhi   26-Apr-2011

The public sector oil companies expect the government’s green signal on raising petrol prices to come through as soon as the poll process in the assembly elections of West Bengal, Tamil Nadu, Kerala and Assam draws to a close.

IndianOil (IOC) chairman-cum-managing director (CMD) R. S. Butola on Monday said, “We would do it (raise petrol prices) at the earliest possible.” Asked if the petrol price will be increased soon after assembly elections are completed on May 10, he said a review will take place soon.

Butola said IOC and the other public sector oil firms had consciously decided not to increase the price of petrol to keep the “environment happy.” On January 15, the public sector oil companies had announced a Rs. 2.50 per litre hike in the price of petrol, making what the government sees as the “ rich man’s fuel” costlier by more than Rs. 10 per litre in seven months. This worked out a whopping 22 per cent increase in six successive increases. Petrol now costs as much as Rs. 58.37 per litre at retail outlets in Delhi.

Any hike in petrol prices will fuel inflation further as commuting costs go up and add to the crushing burden on household budgets already stretched by soaring prices of essential foodstuffs.

IOC, Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) have been piling up huge losses as the government has asked them to keep prices of petrol, diesel, liquefied petroleum gas (LPG) and kerosene on hold, despite skyrocketing prices of crude oil in the international market due to political reasons.

While the Centre has switched to a market- determined price for petrol since June this year, in practice it is still exercising some control as inflation has become a political hot potato.

The oil companies have been keen to increase the prices of petrol but the government asked them to wait till the assembly elections were over as it did not want the opposition to exploit the issue for political gains. IOC is losing around Rs. 7.50 per litre on petrol.

“In our consideration, we decided to take these losses for some time,” Butola said. The oil firms also want to raise the price of diesel and LPG, but since these are politically sensitive commodities the government has been cautious on the issue. Diesel prices have remained constant, while petrol prices have changed six times since June last year.

Butola said IOC was losing Rs. 297 crore per day on selling diesel, LPG and kerosene at current prices regulated by the government.

“We are losing Rs. 18.11 per litre on diesel, Rs. 28.33 a litre on kerosene and Rs. 315.86 per 14.2-kg domestic LPG cylinder,” he said.

The company’s debt is reported to be increasing at Rs. 5,000- 6,000 crore every month as it has go in for more borrowing to finance crude oil imports.

It expects the government to compensate it for the losses.

IOC’s debt stood at about Rs. 53,000 crore at the end of March.

While retail price of petrol is benchmarked at $ 98 per barrel of international rates, the same for diesel is at $ 72- 73 equivalent in India.