Diesel, kerosene and LPG price likely to be hiked by July

The oil ministry has submitted a proposal to the Empowered Group of Minister (EGOM) for fuel price hike. The ministry has proposed that customs duty on crude oil be scrapped along with the excise duty on diesel.  The ministry has sought a Rs 4 hike on diesel, if duty stays. Similarly, Rs 150 hike in liquefied petroleum gas (LPG) and Rs 9 hike in kerosene would help the ailing oil and gas sector, says the oil ministry. 

Meanwhile, the government is expected to raise diesel, cooking gas and kerosene prices next month after a gap of one year as cash-strapped state oil marketing companies complain that their borrowings have risen alarmingly and they will be forced to cut fuel supplies, starting with cooking gas.

State-run refiners are facing acute liquidity crunch as their market borrowings have soared to Rs 1,00,000 crore from Rs 97,000 crore in March. The empowered group of ministers, which is authorised to raise fuel prices, is expected to meet early next month to decide partial price hike on individual products against companies' demand to increase diesel rates by Rs 15.44 per litre, kerosene by Rs 27.47 per litre and cooking gas by Rs 381 per cylinder, say sources.  

The government had frozen the prices of diesel, cooking gas and kerosene for a year fearing voter backlash against the inflationary move ahead of crucial assembly elections. The government last raised prices of politically sensitive fuel on June 25, 2010 when kerosene became costlier by Rs 3 a litre, diesel by Rs 2 a litre and cooking gas by Rs 35 per cylinder. Crude prices have risen from about $75 per barrel then to $110 a barrel.  

Ministry officials said that they would place facts before the empowered group of ministers (EGoM) 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 had also indicated that a fuel price hike was imminent but he had declined to give specific details. "We are still exchanging notes, there are no specific suggestions by the oil ministry to EGoM," he had said. Reddy had met Prime Minister Manmohan Singh last week to explain the financial condition of state-run oil firms and a pressing need to revise fuel prices.