Govt awaits Parikh report to free oil

The government may take a decision on freeing petrol and diesel prices after the Kirit Parikh committee on rationalising fuel subsidies submits its report this week, oil minister Murli Deora said. Price of petrol may go up by Rs 4.70 a litre and diesel by Rs 2.30 a litre if the government gives the pricing freedom to state-owned oil marketing companies — IndianOil Corporation (IOC) Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL).

A decision to increase fuel prices may also depend on the outcome of Mr Deora’s meeting with finance minister Pranab Mukherjee on Tuesday regarding subsidy-sharing issue. “We will be meeting finance minister tomorrow to see how this under-recovery (revenue loss) is to be met,” Mr Deora said.

A price hike of petrol and diesel is imminent unless finance ministry pays full cash compensation to state-owned oil companies for kerosene and cooking gas, an oil ministry official said requesting anonymity. The finance ministry has decided to pay a compensation of only Rs 12,000 crore in 2009-10 to public sector oilcos for selling kerosene and cooking gas below cost as against total estimated revenue loss of Rs 31,000 crore in the fiscal year.

In July last year, the cabinet had taken a decision to meet the entire revenue loss of public sector OMCs on cooking gas and kerosene either through oil bonds or cash. Losses on petrol and diesel were to be compensated by state-owned upstream companies — ONGC, Oil India and Gail India, he said. The upstream companies have already paid about Rs 8,364 crore to the three public sector oil companies for their losses on auto fuels in the first three quarters of 2009-10 .

The finance minister, however, wants to reduce fuel subsidy burden. He is in favour of deregulation , as mounting subsidy burden is a major concern for the public exchequer. The government had to pay over Rs 71,000 crore in 2008-09 as fuel subsidy though oil bonds. Mr Deora agreed with the finance ministry’s view that issuing oil bonds is nothing but postponing the crisis. “Mr Mukherjee is rightly against oil bonds. ... We are trying to find some solution,” he said.

Source: http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/Govt-awaits-Parikh-report-to-free-oil/articleshow/5526113.cms