Petroleum Minister Mani Shankar Aiyar on Friday indicated an imminent hike in petrol and diesel prices as a fallout of the spurt in international crude oil prices but said the consumers would be burdened with the 'least possible' increase.
"The rise in international prices warrants an increase in retail prices. We are trying to balance between consumers' interest, saving oil firms from bankruptcy and keeping fiscal deficit under control. It is possible that a small burden may be passed on to the consumers," he said.
Though Aiyar did not indicate the extent of the hike, officials said the ministry has sought a Rs 3.25 per litre hike in petrol prices and a Rs 4 per litre rise in diesel keeping in view the unprecedented surge in global crude oil prices that touched $66 a barrel on Friday.
The ministry has argued that all state-run oil marketing firms including Indian Oil Corp, BPCL, HPCL and IBP will turn sick if prices were not raised. All the companies have posted net losses in the first quarter this fiscal.
"All the facts relating to the burden on oil companies consequent to the rise in global prices have been placed before the Cabinet. In addition, I have personally written to the prime minister and finance minister appraising them of the situation," Aiyar said.
"It is not for the Petroleum Minister to decide (on price hike). The decision has to be taken by the Cabinet," he added.
Aiyar said the government will consult its allies and the parties supporting it from outside before taking a decision.
Aiyar said bulk of the burden would be borne by oil firms and a part may be borne from government finances. "Least possible burden will be passed on to consumers," he said.
"It is necessary that we keep our oil companies in the pink of health. It is necessary we keep our fiscal deficit under check and it is necessary that consumers of oil products be insulated as far as possible from the spiraling international oil prices," he said, adding that a delicate balance among the three was being attempted.
Global oil markets have surged this week to an all-time high of 66 dollars per barrel because of huge speculative buying, sky-high global demand and shutdowns at some American refineries.
The ministry has argued that oil companies will turn sick if domestic prices are not increased. According to ministry's estimates, IOC's subsidiary IBP will be the first to turn financially sick by as early as next month as losses arising from freeze on fuel prices will erode its net worth.
BPCL will turn sick in just over a year from now and HPCL will take just 20 months to be referred to Board of Industrial and Financial Restructuring, Petroleum Secretary S C Tripathi had written to Cabinet Secretary B K Chaturvedi recently.
IOC, the country's biggest oil company, will turn sick in 35 months from now if petrol, diesel, LPG and kerosene prices are not changed in line with the spurt in global oil prices.
IOC, which reported its first ever net loss of Rs 54.2 crore (Rs 542 million) in April-June quarter, suffered an estimated loss (including depreciation) of Rs 744 crore (Rs 7.44 billion) in July alone. BPCL netted a loss of Rs 400 crore (Rs 4 billion) in July over Rs 431.3 crore (Rs 4.313 billion) net loss in Q1, while HPCL saw Rs 475 crore (Rs 4.75 billion) loss in July on top of Rs 507.89 crore (Rs 5.078 billion) net loss of April-June quarter.