Crude oil shock: Govt weighs options

With crude oil prices touching $100 a barrel, the government mulls options including a marginal increase in fuel prices to reduce under- recoveries by public sector oil firms, and has begun consultations with its Left allies on the same.

"Price hike is not the only solution. Others like excise duty cut on auto fuel, as suggested by Left, are also being considered... My endeavour will be to get a decision this month," Petroleum Minister Murli Deora told reporters in New Delhi.

A group of ministers headed by Pranab Mukherjee will meet, possibly next week, to look at alternatives and make a recommendation to the Cabinet.

"The Cabinet will take the final call," he said. While Deora refused to categorically state if the government would not raise petrol and diesel prices as an answer to the Rs 340 crore (Rs 3.4 billion) per day loss oil PSUs suffered on fuel sales, senior functionaries said a hike of Rs 4 a litre in petrol and Rs 2

per litre in diesel would be suggested to the GoM.

Indian Oil Corporation chairman Sarthak Behuria said: "We need a lasting solution, not ad-hoc responses. The government should free pricing of petrol and diesel from its control and subsidise domestic LPG and kerosene from the Budget."

Currently, the under-recoveries on petrol, diesel, LPG and kerosene -- estimated to cross Rs 70,000 crore (Rs 700 billion) this fiscal -- are shared between the government (which issues oil bonds), upstream oil producers like ONGC, and fuel retailers.

Deora said he had talks with Left leaders, including Sitaram Yechury, of CPI-M late last week. "The Left (parties) are very cooperative. They have said they will assist in finding a solution for the present crisis."