Government to hike diesel, kerosene and LPG prices by July

The ministry of petroleum and natural gas has submitted a proposal to the empowered group of ministers (EGoM) for a hike in fuel prices. The ministry has sought the scrapping of customs duty on crude oil along with the excise duty on diesel.

The ministry has demanded a Rs4 hike in diesel prices, with the duty intact. It has also sought a Rs150 hike in liquefied petroleum gas (LPG) and Rs9 hike in kerosene to help the ailing oil and gas sector, according to the oil ministry.

Meanwhile, the government is expected to increase diesel, cooking gas and kerosene prices next month. This hike coming after a gap of one year follows complaints by cash-strapped state oil marketing companies that their borrowings have risen alarmingly and that they would have to cut fuel supplies, starting with cooking gas.
State-run refiners are faced with an acute liquidity crunch with their market borrowings soaring to Rs1,00,000 crore from Rs97,000 crore in March.

Meanwhile, the empowered group of ministers, which is authorised to raise fuel prices, would meet early next month to take a decision on partial price hike on individual products against companies' demand to increase diesel rates by Rs15.44 per litre, kerosene by Rs27.47 per litre and cooking gas by Rs381 per cylinder, according to sources.

The government had held back increasing prices of diesel, cooking gas and kerosene for a year on fears of a voter backlash against the inflationary move ahead of crucial assembly elections. The government last raised prices of politically sensitive fuel on 25 June 2010 when kerosene became costlier by Rs3 a litre, diesel by Rs2 a litre and cooking gas by Rs35 per cylinder. Crude prices are up from about $75 per barrel at the time to $110 a barrel.

Ministry officials said they would place the facts
before the empowered group of ministers along with impact of a unit price increase of individual fuel on companies' revenues.

At a press conference earlier this week, oil minister Jaipal Reddy indicated that a fuel price hike was imminent but declined to give specific details. "We are still exchanging notes, there are no specific suggestions by the oil ministry to EGoM," he had said.