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Govt postpones decision on fuel price hike

A high-power ministerial panel, met here Monday to take a decision on fuel price hike and the implementation of the Kirit Parikh recommendations, ended without reaching any conclusion.

Updated: Jun 07, 2010, 18:12 PM IST

Zeebiz Bureau

New Delhi: A high-power ministerial panel, met here Monday to take a decision on fuel price hike and the implementation of the Kirit Parikh recommendations, ended without reaching any conclusion.

After the meeting, Petroleum Minister Murli Deora told reporters that the empowered group of ministers would meet again to take a decision on the matter.

The Parikh committee had recommended the government end the subsidy system and let the oil marketing companies fix the retail price of the fuel according to the international prices. Even if the government implements the recommendations partially, petrol prices would have gone up at least by Rs 3 per litre.

The decision on price hike was postponed as the government was under pressure opposition parties as well its own allies not to increase the fuel price.

Earlier in the day, Deora had said that the oil marketing companies were suffering huge under-recoveries and therefore the prices should be hiked.

Planning Commission Deputy Chairman Montek Singh Ahluwalia, a member of the empowered group, also said the prices should be increased.
According to the Petroleum Ministry, large subsides on fuels are unsustainable.

International crude oil prices rose from $28 per barrel in 2003 to $147 per barrel in 2008 and now quotes at around $75 per barrel (159 litres make a barrel), putting major burden on government resources, as also on state-run oil firms.

The group also includes Agriculture Minister Sharad Pawar, Chemicals and Fertiliser Minister M.K.Azhagiri, Railways Minister Mamata Banerjee and Road Transport Minister Kamal Nath.

Oil marketing companies had to contend with under-recoveries of Rs.46,051 crore last fiscal, for which the government provided them assistance of Rs.26,000 crore, while the upstream oil companies contributed around Rs.14,430 crore.=
The balance had to be absorbed by the oil marketing companies.
During this year, the government has already approved prices of transport prices to be raised twice, so that the fuel subsidy bill does not shoot up from the Rs.90,000 crore ($20 billion) budgeted for the current fiscal.

In the federal budget for this year, presented Feb 26, the finance minister hiked petrol and diesel prices by Rs.2.71 and Rs.2.55 a litre, respectively. Then July 2, their prices were raised by Rs.4 and Rs.2 a litre in that order.

As a result, petrol in the national capital, for example, costs Rs.47.93 per litre, while diesel costs Rs.38.10 per litre.