Petrol, diesel, LPG and kerosene prices are unlikely to be revised immediately as the Congress-led Government, which is yet to assume office, will first thoroughly review the situation arising out of rising crude oil prices and revisit the pricing policy of the fuels.
On the one hand state oil firms are pressing for hike in petrol and diesel prices in step with the rising cost of raw material while on the other their profitability has jumped significantly despite claims of heavy losses in selling fuel.
Petrol prices set to be hiked?
"We will put forth all facts and relevant data for a decision by the new government. The pricing principle will be discussed," petroleum secretary B K Chaturvedi said at a Confederation of Indian Industry lecture on 'Hydrocarbon Strategy - Volatility of Oil Markets - Road Ahead.'
Oil companies are seeking an increase of at least Re 1 per litre in petrol and diesel prices as the sharp jump in international crude oil price since last month has eroded the over-recoveries from petrol and diesel to subsidise LPG and kerosene. Petrol and diesel prices were last revised on January 1, 2004 and since then crude oil prices have jumped by over $6 a barrel.
The new government will also be handed the task of deciding on the subsidy on LPG and kerosene. Because of unchanged prices of the two products in the last two years and reduction in budgetary support to one-third from April 2004, the under-recoveries on account of the two products is estimated at nearly Rs 14,000 crore (Rs 140 billion) in 2004-05.
To sustain normal margins, price of LPG would have to be raised by Rs 101.79 per 14-kg cylinder and kerosene prices by Rs 5.68 per litre.
Chaturvedi said one way of checking the effect of global oil price rise on domestic markets was to reduce customs (import) duty on crude oil and excise duty on product.
The government may also decide to increase subsidy on LPG and kerosene and continue the scheme, which is scheduled to end (by this fiscal), for few more years.
Despite the claims of oil companies that they are losing heavily on selling petrol, diesel, LPG and kerosene below the costs, they have posted hefty profits in 2003-04.
Indian Oil Corp, which controls 60 per cent of the retail market, reported a jump of 31 per cent in its net profit to Rs 5154.88 crore (Rs 51.55 billion) in April-December 2003 over Rs 3915.24 crore (Rs 39.15 billion) in the same period last fiscal while Hindustan Petroleum Corp's profit was up 52.3 per cent to Rs 1376.09 crore (Rs 13.76 billion).
IBP's profits more than doubled to Rs 215 crore (Rs 2.15 billion) in 2003-04 and Bharat Petroleum Corp's net profit jumped 35.6 per cent to Rs 2,472 crore (Rs 24.72 billion) in the fiscal.
"An independent oil sector regulator would be set up to check profiteering by oil companies," Chaturvedi said, adding the Bill for setting up the Petroleum Regulatory Board is pending before the Parliament for approval and the new government may also take a hard look at some of the provisions in the bill.