Fuel price hike after Budget session, hints FM

Finance Minister Pranab Mukherjee today said the government would discuss with various stakeholders issues like containing fuel subsidy following hardening of global oil prices after the Budget session as it requires political consensus.

"...After the Budget session of Parliament is over, I shall discuss with various state governments, Chief Ministers, leaders of political parties and try to work out an overall mechanism through which we will be to deal some of the very crucial issues for which the collective support of all stakeholders are called for," Mukherjee told reporters here.

He was replying to a query on what steps are being taken to contain fuel subsidy following hardening global oil prices.

The government had decontrolled petrol price in June 2010, diesel and domestic LPG are sold at highly subsidised prices.

But even petrol price have not moved in tandem with cost with state oil firms losing over Rs 5 a litre because of a informal moratorium imposed in view of assembly polls. They currently lose Rs 14.73 a litre on diesel, Rs 30.10 a litre on kerosene and Rs 439.50 per LPG cylinder.

Mukherjee said his government is working on methods to deal with the problem of rising crude prices and a decision would be taken in consultation with all stakeholders.

High subsidies are putting pressure on the country's fiscal deficit, which is likely to touch 5.9% of the GDP this fiscal and 5.1% in 2012-13.

An increase in fuel prices is necessary to cut down government's subsidy payout as state-owned oil firms are projected to lose Rs 200,000 crore on selling fuel below cost next fiscal. As per present policy, the government will have to make good half of it by way of cash subsidy.

In the current fiscal, the government has provided Rs 65,000 crore in fuel subsidy, which it hopes to trim down to Rs 40,000 crore in 2012-13. It targets to bring down the subsidy bill to below 2% of GDP in FY13.