A decision on raising retail fuel prices and partly compensating revenue losses of oil firms will be taken by Saturday (May 31), even as Prime Minister Manmohan Singh on Thursday assessed the problems caused by the spike in crude prices.
"Hopefully, by day after tomorrow (Saturday), we will have a solution," Petroleum Minister Murli Deora told reporters after a meeting with the prime minister and key ministers in New Delhi.
"The prime minister and the finance minister saw papers of revenue losses and the price increase in the international market. They realised very much that we need to help (PSU oil companies) on a war-footing," Deora said.
Singh would also discuss the issue with Congress president and UPA chairperson Sonia Gandhi.
A meeting of the Cabinet, which was to have taken up the matter on Thursday, has been postponed, he said.
Any hike in prices would be accompanied by a duty rejig to help state-run oil companies curtail revenue losses that are pegged at Rs 225,000 crore (Rs 2,250 billion) for this fiscal on account of crude prices touching a record level in the global market.
The Cabinet is likely to decide on the proposal to hike prices of petrol, diesel and LPG prices, as also reduction in excise duties on Saturday.
The petroleum ministry has been pushing for a Rs 10 per litre hike in petrol prices, Rs 5 a litre in diesel tags, and Rs 50 per LPG (cooking gas) cylinder.
In the absence of a hike, state-run oil companies HPCL and BPCL would run out of cash to import crude in the next two months, while Indian Oil Corp has said it would run out of money for buying crude by September-end.
The hike pushed for by the petroleum ministry would only help curtail the estimated Rs 225,000 crore (Rs 2,250 billion) revenue losses of oil companies this fiscal.
The companies, at present, are selling petrol at a discount of Rs 16.34 a litre, diesel at a loss of Rs 23.49 per litre, LPG cylinder at a loss of Rs 305.9 and kerosene at a discount of Rs 28.72 per litre.
Indian Oil, Bharat Petroleum and Hindustan Petroleum currently lose close to Rs 580 crore (Rs 5.80 billion) per day on sale of petrol, diesel, domestic LPG and kerosene as they have been barred from raising prices in line with rise in cost.
Crude prices have more than doubled since February when petrol price was hiked by Rs 2 per litre and diesel by Re 1 per litre. Early this month, the prices breached $135 a barrel mark.
The three firms are faced with a huge liquidity crunch and are borrowing Rs 3,500 crore (Rs 35 billion) a month to meet day-to-day expenditure. With borrowings touching Rs 65,000 crore (Rs 650 billion), the companies are now talking to banks to raise borrowing limit.
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