Finally, Govt looks like biting bullet on fuel prices

The much-awaited meeting of a high-powered Government panel on fuel prices was postponed to 7:30 pm on Friday. The EGoM on fuel prices was earlier scheduled to meet at 1:00 pm. The EGoM was postponed because the panel was considering various options, and to prevent any possible hoarding, Union Petroleum Minister Jaipal Reddy told reporters in New Delhi.

Meanwhile, shares of IOC, ONGC, HPCL, BPCL, Gail India and Oil India gained in a rising market on hope that the Centre will finally take the bold step of aligning the local fuel prices with the international market.



The Government has not revised the prices of diesel, cooking gas and kerosene for the last one year though petrol prices have been adjusted quite a few times since it was de-regulated in June last year. Petrol prices have risen about 23% since last June. International crude oil prices are up by about 39% over the same period.

The EGoM could lead to an increase in diesel and LPG prices. Both were last revised in June last year by Rs 2 and Rs 35, respectively. The increase in diesel and LPG prices will help public sector oil marketing companies (OMCs) cut their losses on the sale of these fuels.

Currently, they are suffering a loss of Rs. 14-15 on the sale of every litre of diesel, ~Rs 370-380 on a LPG cylinder and Rs. 25-26 on a litre of PDS kerosene. For the current quarter (April to June), the OMCs are estimated to incur a loss of Rs. 450bn compared to Rs. 180bn in the corresponding quarter of last year.

The panel could also contemplate tweaking the duties on crude oil and petroleum products to mitigate the impact of any fuel price hike on OMCs and consumers.

The EGoM on fuel prices was to meet on May 11, immediately after the assembly elections in four states. However, it has been postponed repeatedly for lack of consensus on the politically-sensitive issue.

The EGoM is headed by Finance Minister Pranab Mukherjee, and includes Petroleum Minister Jaipal Reddy, Agriculture Minister Sharad Pawar, Power Minister Sushil Kumar Shinde, Road Transport Minister C.P. Joshi, Chemicals & Fertiliser Minister M.K. Alagiri, and the Planning Commission's Deputy Chairman, Montek Singh Ahluwalia.