Oil firms get autonomy to hike prices

New Delhi: Petroleum minister Murli Deora has given a written reply to the Rajya Sabha saying the Government has given public sector oil marketing companies the freedom to revise petrol and diesel prices on a monthly basis.

"The government has permitted autonomous adjustments in fuel prices by PSU oil marketing companies every month," Deora said on Tuesday.

The minister added, since the last price hike on the June 6 the average price of Indian crude oil basket has surged from $ 66 - 67 a barrel to well over $71.

Ministry officials say that, public sector oil firms decided not to pass on the higher crude prices to consumers on the first of August, when the monthly revision was due.

"The oil marketing companies have so far not effected any adjustments in prices since last price increase on June 6, 2005," he said.

The Government has given autonomy to public sector oil firms to revise petrol and diesel prices on a monthly basis in line with international prices.

The Union Cabinet had on June 5 raised petrol price by Rs 4 per litre and diesel by Rs 2 per litre and given autonomy to public sector retailers to raise prices when Indian basket of crude oil stays above $70 a barrel for a month.

Crude prices surge

Officials said the average price of Indian basket of crude oil at time of last hike was $66-67 a barrel.

However the July average, stayed well over $71 a barrel but public sector oil firms decided not to pass on the surge on August 1, when the monthly revision was due.

"During current month, the Indian basket has averaged over $73 per barrel," officials said.

"The current situation is unprecedented," Deora said adding the burden of rising crude prices was shared between the Government, oil companies and the consumers.

The Government, however, did not increase the prices of PDS kerosene and domestic LPG to protect the interests of the common man and the weaker sections of society.

Oil bonds

"The total burden on account of escalated international prices of crude oil is estimated at Rs 73,500 crore for the current year," Deora said.

He further added that the government along with oil companies have decided to absorb over 87.5 per cent of this burden, leaving only the balance 12.5 per cent to be borne by the consumers by way of increase in petrol and diesel prices.

The Government is to issue oil bonds worth Rs 28,300 crore for the current fiscal to partly compensate the revenue loss on selling petrol, diesel, LPG and kerosene below their production cost.

In line with the decision, the Finance Minister P Chidambaram on Monday tabled supplementary grants providing for issue of Rs 14,150 crore of oil bonds to public sector oil firms for their under-recoveries on fuel sales during the first two quarters of 2006-07.

(With agency inputs)