Government weighs free-pricing of petrol, diesel

The government is considering a proposal to free petrol and diesel from its price control once crude oil prices stabilise at current levels of under $45 a barrel.

Reports quoting petroleum ministry officials said if the current price level is sustained for for two or three months, the government may free petrol and diesel prices from administrative controls.

The reduction in prices by Rs5 per litre on petrol and Rs2 per litre on diesel, announced recently, has not affected oil marketing companies' profitability as they still earn Rs9.89 a litre on petrol and Rs1.03 per litre on diesel, the report noted.

The new pricing mechanism, while helping consumers, should also compensate  state-run oil firms for losses on the sale of domestic LPG and kerosene, the report quoted the official as saying.

Indian Oil Corporation (IOC), the country's largest oil marketer and refiner, which accounts for about half the market, has reported daily under-recoveries of about Rs25 crore. His would top Rs50 crore for all the three marketing companies put together.

The three state-run oil marketing companies – IOC, BPCL and HPCL - are projected to lose Rs1,14,500 crore this fiscal on fuel sales, of which only Rs30,000 crore would come from ONGC, GAIL and OIL. The rest would be in the form of oil bonds, the official said.

The government, which had in April 2002 freed auto fuels from administrative price control, had to bring them back under price control following a continuous revision of prices by fuel retailers in line with changes in costs.