State-run refiners are facing acute liquidity crunch as their market borrowings have soared to Rs 1,20,000 crore from Rs 97,000 crore in March. They will now be forced to cut imports leading to shortage of fuel, two government officials with direct knowledge of the matter said.
The empowered group of ministers, which is authorised to raise fuel prices, is expected to meet early next month to decide partial price hike on individual products against companies' demand to increase diesel rates by Rs 15.44 per litre, kerosene by Rs 27.47 per litre and cooking gas by Rs 381 per cylinder, an official said requesting anonymity.
The government had frozen the prices of diesel, cooking gas and kerosene for a year fearing voter backlash against the inflationary move ahead of crucial assembly elections. The government last raised prices of politically sensitive fuel on June 25, 2010 when kerosene became costlier by Rs 3 a litre, diesel by Rs 2 a litre and cooking gas by Rs 35 per cylinder. Crude prices have risen from about $75 per barrel then to $110 a barrel.
Oil companies, that enjoy a pricing freedom for petrol since June 25, are expected to raise its price also. "They want to raise petrol price by Rs 2 a litre, but it will be done simultaneously," one official said.
Oil companies have so far revised pump prices of petrol 10 times since it was deregulated last year. Oil ministry officials said that state-run oil companies - IOC, BPCL and HPCL - were suffering a revenue loss of Rs 450 crore every day on sale of controlled fuel and a price hike was imminent.
Ministry officials said that they would place facts before the empowered group of ministers (EGoM) along with impact of a unit price increase of individual fuel on companies' revenues. "Final decision would be taken by the EGoM," an oil ministry official said.
At a press conference earlier this week, Oil Minister Jaipal Reddy had also indicated that a fuel price hike was imminent but he had declined to give specific details. "We are still exchanging notes, there are no specific suggestions by the oil ministry to EGoM," he had said. Reddy had met Prime Minister Manmohan Singh last week to explain financial condition of state-run oil firms and a pressing need to revise fuel prices
Source : ET