Diesel prices may be hiked by Rs10 per litre over a 10-month period and kerosene ratesincreased by same quantum over the next two years if aproposal being mulled in the Oil Ministry is accepted.
The price hike is being considered as the governmentscrambles to find ways to meet an unprecedented Rs 160,000crore deficit expected this fiscal on selling diesel, cookinggas (LPG) and kerosene below their production cost.
Price of diesel, which currently costs Rs 47.15 per litrein Delhi, was last revised on September 14 when it was hikedby a steep Rs 5.63 per litre. Kerosene rates have not changedsince June last year and it currently costs Rs 14.79 per litrein Delhi.
"We are left with no choices... there is a need to raiseprices. The government is contemplating raising diesel pricesby Re one per litre each month for next 10 months to bringretail rates at par with their cost," an Oil Ministry sourcesaid here.
State-owned oil companies currently sell diesel at a lossof Rs 9.28 per litre and the hikes over the next 10 monthswill eliminate all of the losses and absolve the governmentfromproviding any subsidy on the nation's most consumed fuel.
The source said price of kerosene could be increased byRs 10 over a two-year period considering it is being used as acooking fuel by the poor. The price hike along with promotinguse of LPG and natural gas as fuel would help cut consumptionof the kerosene by 20 per cent, he said.
While government is likely to raise soon the number ofsubsidised cooking gas (LPG) from 6 to 9 cylinder of 14.2-kgper household annually, the ministry wanted to have just tworates for the fuel -- a subsidised price and a market rate,instead of four rates presently, he said.
Subsidised LPG costs Rs 410.50 per 14.2-kg cylinder and any household requirement beyond current cap of 6 cylinders isto be bought at near market price of Rs 895.50 per bottle. Fornon-domestic use, a 14.2-kg LPG cylinder costs Rs 1,156 whilea 19-kg cylinder for commercial use is priced at Rs 1,619.
The source said state-owned Indian Oil Corp, HindustanPetroleum Corp and Bharat Petroleum Corp together in first sixmonths of current fiscal lost Rs 85,586 crore on sellingdiesel, domestic LPG and kerosene at government-controlledrates which are way below their cost. Of this, the bulk Rs52,711 crore was on account of losses on diesel.
The government has promised a cash support of Rs 30,000crore to cover a part of the Rs 85,586 crore revenue loss onfuel sales during April-September. Upstream oil firms likeONGC have chipped in Rs 30,170 crore, leaving a balance Rs25,417 crore uncovered, he said.
The Oil Ministry, he said, wants Finance Ministry to makeup for this shortfall as well as the revenue deficit expectedin the remaining six months of current fiscal.
In all, the Oil Ministry has sought Rs 105,525 crore fromthe Finance Ministry this fiscal to subsidise diesel andcooking fuel.
State-owned fuel retailers are likely to end the fiscalwith a revenue loss of over Rs 1,63,000 crore on sale ofdiesel, domestic cooking gas (LPG) and kerosene at government-controlled rates that are way lower than cost.
Of this, close to Rs 60,000 crore will come from upstreamcompanies Oil and Natural Gas Corp (ONGC), Oil India Ltd andGAIL India. For the rest, the Oil Ministry has asked theFinance Ministry to give cash subsidy.