Oil price bomb to explode

May 8 – that's when the fuel price bomb starts ticking and, say experts, is expected to explode not very much later than that. For, May 8 is when the state polls get over, giving the Centre political space to raise fuel prices.

A dark hint was dropped on Tuesday by finance minister P Chidamabaram in Coimbatore when he said the decision to increase petrol and diesel prices can't be put off for ''very long as global crude oil prices have crossed $70 a barrel.'' Actually, on Tuesday crude touched $74 a barrel. What's more, the Iranians are saying that the price could cross $100 this winter.

Said a seemingly helpless Chidambaram: ''The finance minister or petroleum minister cannot find a solution in this regard. It has to be decided through consensus, for which all political parties have to meet,'' Chidambaram said. ''When the price of a barrel reached $25 it was an economic issue but when it crossed $65 to $70 it becomes a complex political issue.''

The Iranian whammy came from its deputy oil minister Hadi-Mohammad Nejad-Hosseinian, who said in New Delhi that he would not be surprised if crude touched $100 a barrel this winter.

For India, the reality lies somewhere between these two statements. It is expected that the US, where high oil prices are already pinching the motoring season, will intervene in the market and use its influence with Opec if crude shows no sign of calming. But even at $70-levels, India's state-owned companies can't maintain their profitability if prices are not raised.

Clearly, Chidambaram is drawing the line on how much hand-holding his ministry can do for state-owned oil companies. The firms ran up a loss of Rs 39,595 crore in 2005-06 because the government did not allow them to raise prices in line with international crude.

They lost Rs 14,384 crore on kerosene, Rs 10,245.47 crore on cooking gas, Rs 13,284 crore on diesel and Rs 2,680 crore on petrol. This loss was in spite of the Rs 14,000 crore pooled in by oil and gas producers such as ONGC and Rs 750 crore discounts from suppliers like Reliance Industries.