News Release Details
N-deal standoff makes fuel price hike unlikely
New Delhi 01-Sep-2007
The government has decided not to go ahead with a hike in the prices of petrol and diesel, despite repeated requests from the oil marketing companies, which bear the subsidy burden. "The price of the Indian crude oil basket has dipped from around $74 to around $68 a barrel," said a senior oil ministry official, "Moreover, with the heat the nuclear deal is generating between the Left and the government, the latter is not likely to risk another standoff (on fuel price hike)," the official added. This means a gloomy quarter for government-owned oil marketing companies as they will not get the oil bonds from the government to compensate them for the losses they make on selling petrol, diesel, kerosene and LPG at government-controlled prices. "The oil bonds are likely to come up for Parliament's approval in the winter session in December," said the official. There was no mention of the oil bonds in the supplementary demand for grants tabled in this session of Parliament. A parliamentary approval is needed as there is no provision for these bonds in the Budget.However, the finance ministry has agreed to share one-third of the revenue losses of oil marketing companies "in-principle." Another one-third will be borne by upstream oil companies such as ONGC. The three government-owned oil marketing companies — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation—are losing around Rs 180'crore a day by selling fuels at less than the cost. The losses have, however, come down from around Rs 195 crore a day in July as the average price of the Indian crude oil basket in August so far has been around $68.95 per barrel as against $72.69 in July. Though oil companies have been demanding relief in the form of a price hike, they concede such a move is unlikely. "It all depends on the political climate. But we know that a hike in the immediate future is unlikely," said a senior official of an oil marketing company.
New Delhi 01-Sep-2007
The government has decided not to go ahead with a hike in the prices of petrol and diesel, despite repeated requests from the oil marketing companies, which bear the subsidy burden. "The price of the Indian crude oil basket has dipped from around $74 to around $68 a barrel," said a senior oil ministry official, "Moreover, with the heat the nuclear deal is generating between the Left and the government, the latter is not likely to risk another standoff (on fuel price hike)," the official added. This means a gloomy quarter for government-owned oil marketing companies as they will not get the oil bonds from the government to compensate them for the losses they make on selling petrol, diesel, kerosene and LPG at government-controlled prices. "The oil bonds are likely to come up for Parliament's approval in the winter session in December," said the official. There was no mention of the oil bonds in the supplementary demand for grants tabled in this session of Parliament. A parliamentary approval is needed as there is no provision for these bonds in the Budget.However, the finance ministry has agreed to share one-third of the revenue losses of oil marketing companies "in-principle." Another one-third will be borne by upstream oil companies such as ONGC. The three government-owned oil marketing companies — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation—are losing around Rs 180'crore a day by selling fuels at less than the cost. The losses have, however, come down from around Rs 195 crore a day in July as the average price of the Indian crude oil basket in August so far has been around $68.95 per barrel as against $72.69 in July. Though oil companies have been demanding relief in the form of a price hike, they concede such a move is unlikely. "It all depends on the political climate. But we know that a hike in the immediate future is unlikely," said a senior official of an oil marketing company.