Marginal rise likely in petrol, diesel prices

As the country prepares to switch over to the Euro IV standard fuel regime from April 1, 2010, petrol prices in Delhi and Mumbai and 12 other metro cities are likely to be increased by Rs.0.41 a litre and diesel by Rs.0.26 a litre from the same day, Petroleum Secretary S. Sundareshan said on Wednesday.

As a massive investment has been made for upgradation to the present fuel standards, the Petroleum Ministry wants that the oil marketing companies (OMCs) should not suffer any further losses. “This Rs.0.41 a litre hike needed in petrol price and Rs.0.26 per litre in diesel rates is not on the basis of Rs.40,000-crore capital expenditure oil firms incurred in upgrading their facilities to produce cleaner fuel but a requirement to bring domestic rates to international parity,” Mr. Sundareshan said at the launch of Euro-IV supplies here. Petroleum and Natural Gas Minister, Murli Deora, Minister of State for Petroleum and Natural Gas Jitin Prasada and Delhi Chief Minister Sheila Dikshit were present on the occasion.

The actual price hike needed to cover the cost would have been 3-4 times the proposed increase. Oil firms will sell ultra-low sulphur petrol and diesel in 13 major cities from April 1, while Euro-III grade fuel is to be supplied only in the rest of the country.

Like the cost of shifting from Euro-III to Euro-IV in 13 big cities, a marginal increase in petrol and diesel prices is also proposed in the rest of the country which would move from Euro-II grade auto fuel to Euro-III specification.

However, the quantum of price hike for Euro-III fuel has not been finalised as yet.

Mr. Sundareshan also hinted at some harsh decisions to prevent revenue loss on auto and cooking fuels from rising to Rs.70,000 crore next fiscal from Rs.47,960 crore this year. “Under-recoveries will rise if we do not take very, very hard decisions soon,'' he said, indicating his Ministry's inclination for an increase in petrol and diesel prices.

Countering arguments that fuel prices led to inflation, he said the government borrowings, to mostly fund subsidies, was responsible to a greater degree for the rise in prices. If fuel prices are not raised further, 2010-11 will see under-recoveries (revenue loss) on fuel sales rising to Rs.70,000 crore, he said.