Another hike in prices in the offing, says IOC boss
New Delhi   15-May-2011

Oil marketing companies say increasing the prices has become must as global crude prices have gone up substantially in the last five months.

"We have been holding the price line for five months to avoid putting burden on consumers. Even now, we are passing only half the burden. We have been losing Rs 10.50 on a litre of petrol," R S Butola, chairman, IndianOil, told TOI.

Butola said another revision was in the offing since higher crude prices and losses on fuel sales were forcing the company to borrow Rs 8,000 crore every month. "There's no option left. Our borrowings have exceeded Rs 67,000 crore...finances are under tremendous strain...the company can't go on."

Though household budgets are under strain, the pain might not be visible in the government's inflation figure. After all, petrol accounts for just 1% of the wholesale price index (WPI). A subsequent increase in diesel and cooking gas price would reflect part of the problem since these fuels have about 5% weightage in WPI. In any case, it will have a cascading effect as transportation cost will rise.

To escape the charge of cartelization, the three state-run oil marketing firms would keep marginal difference of a few paise in their petrol prices. State-run retailers deliberately keep this difference to avoid carterlization charges from private refiner-marketers.

The oil ministry had been preparing for a round of price increase. Officials had secured the EC's green signal to raise petrol price just after the last round of polling on May 10. It was, however, decided to wait till the fortnightly price review by the oil companies.