Fuel price rise in the pipeline as OMCs' losses surge

Govt-controlled OMCs expect a political go-ahead after the Parliament session ends this week

With the revenue loss on diesel sales rising to a record Rs 17 a litre, the central government is likely to soon go for a fuel price rise. The ministry of petroleum and natural gas has circulated a Cabinet note, making a case for such an increase.

Government-controlled oil marketing companies (OMCs) expect a political go-ahead after the Parliament session ends this week.

The political upheaval on the coal scam has complicated the government task on taking a decision. “We have circulated a note informing the cabinet about the deteriorating health of OMCs and the difference between existing and desired price of various products,” said a senior ministry official.

The Cabinet Committee on Political Affairs is likely to take up the matter, since the empowered group of ministers on fuel pricing has not been reconstituted after Pranab Mukherjee moved out as finance minister.

With non-revision of diesel prices for more than a year, the revenue loss or under-recovery of OMCs on diesel have jumped to Rs 17.05 a litre. Based on the previous fortnight’s pricing trend, the losses on kerosene and domestic LPG have also risen sharply to Rs 32.70 per litre and Rs 347 per cylinder, respectively. The last rise in all these products was done in June 2011.

Though the government is officially non-committal on freeing of diesel prices, it is likely to bite the bullet. “The single biggest reform we should undertake is correcting the petroleum prices,” said the official.

Diesel accounts for around 60 per cent of the total revenue loss of the three OMCs -- Indian Oil, Bharat Petroleum and Hindustan Petroleum. They sell diesel, kerosene and domestic LPG at government-set rates. Currently, the combined daily loss of these three companies on these three products is Rs 551 crore, compared to Rs 405 crore in the previous fortnight.

In addition, there is a loss of around Rs 4 per litre on petrol.