Fuel price hike likely soon: IndianOil
Guwahati   23-May-2012

Fuel prices are expected to go up with the IndianOil claiming heavy losses suffered due to sale of fuel below market price.

In an exclusive interview to Zee News, IndianOil Chairman RS Butola said the oil company was suffering huge losses and could hike the prices of fuel in order to compensate.

“We are facing Rs 8 loss per litre on petrol; we are worried and we may hike the prices soon,” said the chairman.

Giving further details of the losses suffered by IndianOil on sale of fuel below market price, Butola added, “We wrote a letter to the government to take decision on diesel (Rs 13.64 loss), LPG (Rs 479 loss) and kerosene (Rs 31.41) price hike”.

Oil firms had lost Rs 4,859 crores on selling petrol below cost in 2011-12 fiscal. This was over and above Rs 138,541 crores they lost on selling diesel, domestic LPG and kerosene below market price in the fiscal.

According to reports, the government may allow a hike in petrol, diesel and cooking gas (LPG) prices after the Budget Session of Parliament.

Price of petrol could be raised by as much as Rs 5 per litre and Rs 3 per litre for diesel, as per reports.

Giving an indication in this regard, Union Finance Minister Pranab Mukherjee had told the Rajya Sabha, "Petroleum prices are increasing by leaps and bounds. We cannot keep them under any carpet. If we do not take corrective measures, we will have to face disastrous consequences."

With losses on sale of petrol climbing constantly, state-owned oil firms have asked the government to either provide subsidy on the fuel or reduce excise duty.

The current retail selling price of Rs 65.64 per litre in Delhi is short of actual cost by Rs 8.60 a litre.

There is an under recovery of Rs 7.17 per litre on sale of petrol. After adding 20 percent local sales tax or VAT, the desired increase in petrol price comes to Rs 8.60 per litre.

In order to mitigate losses on sale of petrol, oil marketing companies have, inter alia, suggested to the government to either declare petrol as a ‘regulated’ product temporarily and provide cash compensation (subsidy) for under- recovery or to reduce the excise duty on petrol from Rs 14.78 per litre by an amount equivalent to the under-recovery on petrol.