Decision on fuel pricing likely this week; revenue loss may affect prices

The government may decide on freeing petrol and diesel prices after an expert committee on fuel pricing submits its report this week, Petroleum Minister Murli Deora said on Monday.

Finance Minister Pranab Mukherjee is believed to be in favour of giving state-run oil firms freedom to fix price of petrol and diesel in step with cost, as he feels the current moderate global oil rates may be the last window India has to deregulate fuel pricing.

“We are trying our best to see that prices are not raised,” Mr. Deora told reporters here.

But a rate hike may become inevitable as government’s limited financial resources are not enough to meet the revenue loss on selling petrol, diesel, LPG and kerosene below cost.

“(The Cabinet had in July 2009) decided that government will meet all of the under-recovery (revenue loss) on domestic LPG and kerosene either through bonds or in cash and the same on petrol and diesel was to be met by upstream companies like ONGC,” he said.

While Oil and Natural Gas Corp, Oil India and GAIL borne the entire Rs 8,364 crore under-recovery on petrol and diesel in first three quarters of current fiscal, the government has agreed to give only Rs 12,000 crore in cash against the Rs 20,989 crore revenue loss on cooking fuel in April-December.

“We will be meeting Finance Minister tomorrow to see how this under-recovery is to be met,” Mr. Deora said adding a decision on fuel pricing was likely only after the Kirit Parikh committee submits its report this week.