The government on Monday said it is not in favour of hiking diesel price in the immediate future even as the current retail rate is nearly Rs 12 per litre lower than its actual cost.
"Whatever we do, we will have to bear the under recovery burden. Whatever be the under recoveries (of the oil marketing companies), we are not in favour of raising (diesel) prices," he said when asked about the huge subsidy burden on diesel, kerosene and domestic LPG.
Public sector oil marketing companies currently lose Rs 11.65 per litre on diesel, Rs 33.93 per litre on kerosene sold through PDS and Rs 468.50 per 14.2-kg domestic cooking gas cylinder.
Last month, the government had raised diesel price by Rs 5 per litre and restricted the supply of subsidised LPG to 6 cylinders per household in a year.
The diesel price hike of last month has led to inflation touching a 10-month high of 7.81 per cent in September.
Despite the diesel price increase of last month, oil marketing companies are projected to lose Rs 167,415 crore (Rs 1674.15 billion) this fiscal on sale of diesel, cooking gas and kerosene as compared to Rs 138,541 crore (Rs 1385.41 billion) revenue loss of 2011-12.
Reddy also ruled out any government intervention in reducing the price of non-subsidised LPG, though acknowledged that its global prices have been rising.
"Although the prices of LPG at global level, more particularly in Middle-East, are going up there is no question of further touching the (non-subsidised) LPG prices," he said.
Addressing the conference, the Oil Minister said India's crude import bill has been at about Rs 7.2 lakh crore currently due to growing consumption of petroleum products and it has left a cascading effect on retail fuel prices.
"From 2009-10 to 2011-12, domestic consumption of petroleum products has increased from 137.8 million metric tonnes (MMT) to 148 MMT. As of today, we import more than 70 per cent of crude, with an import bill of about Rs 7.2 lakh crore. This is the import bill. This has had the cascading effect on retail fuel prices," he said.
The oil minister also said that government's recent decision to allow foreign direct investment (FDI) in multi brand retail will help the farmers and will generate more employment opportunities.
"This is expected to generate more employment opportunities, boost productivity and enhance quality of goods and services through modern infrastructure, optimum resource allocation, improved supply chain etc. I may add here it will help the farmers a bit. The farm sectors suffer from huge lack of cold storages, supply chain," he said.
Photograph: B Mathur/Reuters