Finance Minister P Chidambaram and Petroleum Minister Mani Shankar Aiyar may soon meet Prime Minister Manmohan Singh to decide on fuel pricing in the wake of spiraling international oil prices.
Although Monday's meeting between finance and petroleum ministry officials failed to arrive at a decision on revising fuel prices, sources told PTI the two ministers may shortly meet the Prime Minister to take a final view on whether duties need to be cut or petrol and diesel prices need to be raised.
The petroleum ministry is seeking a Rs 2.50 per litre hike in petrol price and Rs 1.30 per litre increase in diesel after finance ministry expressed reservations on cutting duties on petroleum products.
The oil ministry is of the opinion that the Rs 2.20 per litre hike in petrol and Rs 1.06 a litre in diesel prices necessitated by increase in duties and the additional cost for producing cleaner fuel (Rs 0.30 a litre on petrol and Rs 0.24 per litre on diesel) should be passed on to the consumers.
The cut in customs duty in the budget is expected to erode Rs 5,460 crore (Rs 54.60 billion) in revenues on account of crude oil imports, and Rs 390 crore (Rs 3.9 billion) for LPG and kerosene.
The government also stands to lose Rs 2140 crore (Rs 21.40 billion) on slashing excise duty on LPG and kerosene in the budget. Besides, it stood to lose Rs 1100 crore (Rs 11 billion) on CVD/AV (assessible value).
Against this, government estimates a gain of Rs 8,961 crore (Rs 89.61 billion) from increase in excise duty on petrol and diesel. So, the entire exercise was revenue neutral, sources said. The finance ministry's assumptions of revenues were based on a crude price of $38 per barrel till January.
However, the average price of global crude prices was at $49.27 a barrel, sources said adding, "So, the finance ministry will gain more than they lose."
Besides this, the increase in road cess would fetch another Rs 3,116 crore (Rs 31.16 billion) in 2005-06.
The increased duties and spiraling crude prices warrant a Rs 5.26 per litre increase in diesel and Rs 5.77 a litre hike in petrol prices, without which public sector oil firms stand to lose Rs 2,400 crore (Rs 24 billion) per month.