The government is mulling a Rs 2-3 per litre hike in petrol and diesel prices, as oil firms are losing around Rs 10 per litre on the two fuels due to hardening global prices.
"A formal proposal for an increase may be considered after elections in five states are over next week," a top official said. Finance Minister P Chidambaram had on Tuesday indicated in Coimbatore that a fuel price hike cannot be avoided anymore.
The official said state-owned oil retailing firms were losing Rs 9.34 per litre on selling petrol below the imported cost, while the loss on diesel was Rs 10.43 a litre. Kerosene was being sold at a loss of Rs 16.78 per litre and LPG at Rs 125 per cylinder.
Though there was an urgent need to raise prices of all the four products, kerosene may be spared due to political compulsions. A moderate hike of Rs 10-15 per cylinder can also be approved by the Cabinet, the official said.
State-run Indian refiners have been unable to raise government-capped retail fuel prices since September last year, despite the surge in crude oil prices to record $75 a barrel.
The non-revision of retail prices of petroleum products by the government is expected to lead to under-recoveries of an estimated Rs 75,000 crore (Rs 750 billion) by oil marketing companies - IOC, Bharat Petroleum Corp and Hindustan Petroleum Corp in 2006-07. The three together lost Rs 4,722 crore (Rs 47.22 billion) in revenues in April.
In the year 2005-06, the OMCs' gross under-recoveries amounted to Rs 39,600 crore (Rs 396 billion).
IOC, which controls roughly half of the fuel market, lost Rs 2450 crore (Rs 24.50 billion) on fuel sales in April and is projecting a loss of Rs 1560 crore (Rs 15.60 billion) in the first fortnight of May if prices remained unchanged, the official said.