EGoM may meet on Dec 22 to decide on diesel price hike

An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee may meet on December 22 to decide on raising diesel prices by Rs 1-2 a litre in the backdrop of global crude rates climbing to near $90 a barrel.

"The meeting of EGoM has been tentatively scheduled for the afternoon of December 22," a senior government official said.

With international crude oil having climed to near $90 a barrel, the gap between domestic retail price and their production cost has widened, necessitating the review.

State-run Indian Oil Corp (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) currently sell diesel at Rs 4.71 a litre lower than its cost.

"The oil marketing companies are losing about Rs 75 crore per day on diesel sale and a view has to be taken on raising fuel prices," he said. "Freeing of diesel price (from government control) is not possible at this juncture and at best a hike of Rs 1-2 a litre is likely to be approved."

The government had on June 26 decontrolled petrol price and had decided to make diesel prices market-based in due course.

While petrol price has risen four times since then, diesel rates have remained unchanged. Another hike in petrol price by oil marketing companies is likely in a day or two to make up for the rise in crude prices.

The official said the three state firms lost Rs 11,153 crore in revenues on diesel sales during April-September this fiscal and without any change in price the revenue loss is projected to be Rs 36,540 crore.

IOC, BPCL and HPCL also sell domestic LPG and kerosene below cost and the combined revenue loss for the full fiscal is projected to be around Rs 65,839 crore.

The official said international crude oil (raw material for making petrol and diesel) prices were around $72-74 per barrel in June when the government freed petrol price. Since then crude has climbed to near USD 90 per barrel.

The June 26 decision had resulted in a Rs 3.50 a litre hike in petrol prices in Delhi.

At that time, the government decided to raise the diesel price by an ad-hoc Rs 2 per litre, even though the difference between the domestic retail price and imported cost of the fuel was almost twice of that.

Besides diesel, the oil retailers lose Rs 272.19 on the sale of every 14.2-kg LPG cylinder and Rs 17.72 per litre of kerosene.