India: Govt set to increase fuel prices

There were clear indications on Wednesday that the Centre is seriously considering a hike in prices of petrol, diesel cooking gas and kerosene.

At a time when the common man is getting squeezed with high prices of essential items like sugar, pulses rice and wheat besides vegetables, the UPA government’s move is bound to draw flak from the opposition parties like the BJP and Left, besides even some of the allies of Congress like DMK and Trinamool Congress of Mamata Banerjee, who has already raised a war cry over the issue.

The fuel hike on the eve of the Budget session of Parliament is bound to give ammunition for non-Congress parties to attack the government. Though inevitable, as the high subsidies that the government is giving to protect the people from the economic realities cannot continue forever, the public sector oil companies will continue to feel the pinch of global prices and mounting losses.

With the TV channels screaming during the day over the proposed hike in fuel prices, that will impact on the middle classes with cooking gas getting costlier and kerosene used by the poor, too dearer, long queues of cars were seen in the Capital’s petrol pumps on Wednesday evening.

The Union Cabinet is likely to discuss on Thursday the Petroleum Ministry proposal for freeing petrol prices from government control and a moderate increase in diesel, cooking gas and kerosene rates, ahead of which Oil Minister Murli Deora held consultations with key allies DMK and Trinamool Congress on the subject.

In a move to stifle protests from allies, Deora met A. Raja, Telecom Minister and senior leader of UPA’s key ally, DMK, on Wednesday morning and spoke over phone to Trinamool Congress leader and Railway Minister Mamata Banerjee explaining the “precarious” situation that PSU oil firms would find themselves in, if fuel prices were not hiked.

However, both Raja as well as Ms. Banerjee were non-committal on the stand that their parties may take if the proposal of freeing petrol prices — that would lead to a price increase of Rs 4.72 a litre — when the issue comes before the Cabinet tomorrow. Already, opposition from key allies has seen Deora drop the proposal on freeing diesel prices that would have resulted in rates going up by Rs. 2.33 a litre. However, there is now a move to hike diesel rates by at least Re. one a litre.

Deora may, however, may bargain for an increase in LPG and kerosene rates although it would not be in the range of the steep Rs. 100 per cylinder and Rs. 6 a litre hike, respectively, suggested by the Kirit Parikh panel on fuel pricing reforms. He may bargain for half of the increases suggested by the panel, but may settle at Rs. 25 per cylinder hike in LPG rates and Re. one a litre raise in kerosene prices.

The Congress party core group, which includes UPA Chairperson Sonia Gandhi, will meet to vet the proposal before it goes to the Cabinet.

Deora refused to say on Wednesday what his ministry may propose to the Cabinet. “At the time of presentation of the Kirit Parikh Committee report (last week), I had said that we will process and present our view on it to the Cabinet in one week. We are ready (with comments on the report) and will submit it (the report) to the Cabinet...” The experts group, headed by former Planning Commission member Kirit Parikh, recommended deregulating of petrol and diesel prices, while raising kerosene and domestic LPG rates by Rs. 6 per litre and Rs. 100 per cylinder, respectively.

State-owned Indian Oil, Bharat Petroleum and Hindustan Petroleum sell fuel below cost on the orders of the government and expect a revenue loss of Rs. 46,030 crore on that account this year. Of this, the government was meeting only Rs 12,000 crore, Deora reportedly explained to Raja and Ms. Banerjee. Raja is believed to have told Deora that a position on the proposal will be taken by his party’s leader M. Karunanidhi.

Petrol is currently sold at a loss of Rs. 4.72 a litre, diesel at Rs. 2.33 per litre, kerosene at Rs. 18.06 per litre and domestic LPG at a discount of Rs. 287.59 per cylinder. In case the government plays safe and opts for only marginal price hikes, the Cabinet will also have to decide on how the rest of the revenue loss would be met.

- Asian Tribune -