Oil Prices May Be Raised 9-12% From June 1

The prices of petrol and diesel are expected to be raised from June 1. The hike is likely to be in the range of Rs 2-2.50 a litre for both the fuels.

The magnitude of increase will be decided at a meeting here tomorrow between petroleum minister Ram Naik and senior officials of the oil marketing companies.

It is not known if the finance ministry will also reduce duties on these two petroleum products to give a relief to the oil firms. The firms have been reeling under a heavy financial burden because of the hardening of the international prices of crude.

The government seemed to be of the view that this was the most advantageous moment to increase the prices since the Goa Assembly elections were over today.

Moreover, with the war fear gripping the nation, the political fallout of the move may not be alarming.

The oil companies have been pressing the government for an increase in the prices because they are incurring notional losses of Rs 75-80 crore per day by selling products below the cost of crude. These companies incurred a burden of Rs 993.91 crore during April, the first month after the dismantling of the administered pricing mechanism.

The proposed increase of Rs 2-2.50 a litre is expected to give only partial relief to the oil companies unless there is a duty reduction too. At present, the oil companies are incurring a burden of around Rs 4.19 a litre on petrol and Rs 3.43 a litre on diesel, in Delhi.