Petrol and diesel prices may be hiked by up to Re 1 per litre each on August 15, the next due date for fuel price revision, in step with the surge in global oil prices.
The hike would have been higher but for 10 per cent price band fixed by the government, industry sources said.
International gasoline (petrol) prices have climbed to $49.35 a barrel this month from $45.35 per barrel in April-July while gasoil (diesel) has shot up by $7 a barrel to $47 per barrel.
The hike comes close on the heels of Rs 1.10 per litre increase in petrol prices (in Delhi) and Rs 1.42 per litre increase in diesel prices announced on July 31, the first revision after the government allowed state-run oil firms to fix prices within a 10 per cent price band.
The price band is fixed based on the mean of average landed price of the fuel during the previous quarter and the average landed price in past one year.
"Last time the diesel prices should be gone up by Rs 2.63 per litre but the band prohibited us. This time around, we will hit the ceiling of the band in both petrol and diesel," sources said, adding the oil industry had lost Rs 195 crore (Rs 1.95 billion) this fiscal on selling the two fuels below the cost.
As per the new pricing policy, whenever the required hike in petrol and diesel prices is more than the specified price band, the government has to cut duties to moderate the prices.
"We told the government a day before the July 31 price rise that the band will be breached and it needs to act. So far we haven't seen any action," they said.
The oil industry wants the government to cut excise duty on petrol and diesel for a sobering effect of the spike in international oil prices on the domestic markets.
So far, Petroleum Minister Mani Shankar Aiyar has written to Finance Minister P Chidambaram only on cutting excise and customs duty on domestic cooking gas and kerosene. For petrol and diesel, he has suggested levy of fixed/specific duties instead of present practice of imposition of ad valorem taxes.
"Cut in excise duty on petrol and diesel would not impact central revenues in anyway as the government was mopping up higher amount due to the ad valorem duty structure, which unlike specific duties is a percentage over the cost," sources said.
In case of specific duties, a fixed value in terms of rupees per litre is levied on the fuel so as to not have any cascading effect on the retail selling price due to rise in cost.
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