Govt rules out diesel decontrol, unsure on petrol

IndianOil chief hints at petrol price hike by end of month decontrol would mean Rs 7 rise per litre

In the season of rollbacks, the government seems to be unsure of how to deal with petrol prices. While petroleum minister Jaipal Reddy on Friday was candid enough to admit “there is some kind of discontinuation of deregulation in petrol prices”, the country’s largest retailer, Indian Oil Corporation, kept up pressure for a price hike on the government by demanding compensation for petrol sale losses.

IndianOil chairman R S Butola also hinted at a petrol price hike by the month-end. Decontrolled petrol means raising its price by about Rs 7.72 a litre. Reddy, though, stuck to his stand that the government was not contemplating decontrol of diesel prices. Diesel would require an increase of Rs 14.73 a litre.

Petrol was officially decontrolled in June 2010 but it soon became politically unpalatable to allow a price hike, with a host of state Assembly elections lined up. The government had decided on diesel decontrol then, but not given any road map for it. Despite being decontrolled, petrol’s price has not been revised in line with the market price since November. Diesel and LPG prices were last raised in June 2011 and kerosene prices in June 2010.

The government-owned IndianOil, Hindustan Petroleum Corporation and Bharat Petroleum Corporation have demanded that since they have not been allowed to raise petrol price, they be compensated for Rs 4,500 crore in losses on its sale. Currently, the government compensates oil companies for losses only on diesel, domestic LPG and kerosene.

Reddy said, “There is some kind of discontinuation of deregulation in petrol prices. But, we have no intention of bringing regulation back... Oil companies have no doubt suggested some measures (compensating for petrol). But, the petroleum ministry does not have independent decision-making power on it. I will take up the issue with the empowered group of ministers at an appropriate time.” The group, headed by finance minister Pranab Mukherjee, is empowered to decide prices of the three subsidised products.

Meanwhile, Reddy said India would continue to import crude oil from Iran, without violating any international law.