Oil companies may hike petrol, diesel prices by Rs5 per litre

State-run oil marketing companies (OMCs) are expected to hike petrol prices by Rs3-5 per litre as part of efforts to bridge a record Rs1,80,000 crore of losses arising from surging oil prices and a falling rupee.

Simultaneously, the oil ministry is also considering a hike in diesel prices by at least Rs5 per litre to ease the subsidy burden on oil marketing companies (OMCs).

Sources in the oil ministry say diesel at present is getting a subsidy above Rs10 per litre and a one-time hike in prices of diesel by Rs5 would still leave a recovery gap of over Rs5 per litre on diesel.

Minister of petroleum and natural gas M Veerappa Moily has, meanwhile, urged prime minister Manmohan Singh to go for an increase in the regulated prices of diesel by Rs5 per litre, kerosene by Rs2 per litre and LPG by Rs50 per cylinder in order to partially offset losses to oil PSUs.

Moily, who met finance minister P Chidambaram on Thursday, is reported to have written to the prime minister stating that without a price increase the government will have to shell out a record Rs97,500 crore to subsidise diesel and cooking fuel alone.

"If the present position persists, the total under-recovery (revenue loss) would reach to a level of Rs180,000 crore in the current financial year as compared to Rs161,000 crore during 2012-13," he wrote.

With Indian Oil Corporation, Bharat Petroleom Corporation Ltd (BPCL) and HPCL requiring about $8.5 billion every month to import an average 7.5 million tonnes of crude oil, the government is also thinking of curbing use of petrol and diesel to ease pressure on the country's current account deficit and the rupee.

Although the move is politically unpopular, government sources said efforts are on to move the cabinet immediately after the conclusion of the Parliament's monsoon session and a decision would be taken to reduce the government's subsidy burden.