Veerappa Moily hints at 1 time diesel price hike

In a bid to bridge losses arising from weakening Indian currency, oil minister Veerappa Moily said that the government is considering one time diesel price hike. Speaking to CNBC-TV18, he said that the government is mulling diesel price hike proposals, but no decision has been take yet.  However, he ruled out the possibility of hiking kerosene and LPG prices.

Recently, the finance ministry agreed to give Rs 8,000 crore cash subsidy to fuel retailers IOC, BPCL and HPCL to make up for less than a third of losses they incur on selling diesel and cooking fuel below cost. (Read More) Free falling rupee has worsened India's current account deficit (CAD) and led to widening losses on fuel sales. Oil import is one of the largest contributor to CAD. Oil firms are currently losing Rs 9.29 per litre on diesel, Rs 33.54 a litre on kerosene and Rs 412 per 14.2-kg LPG cylinder. The Cabinet on August 1 cleared the proposal for sale of 10 percent government stake in nation's largest refiner Indian Oil Corporation  (IOC). This stake sale may fetch around Rs 3,750 crore to the exchequer. Moily feels that given the current market conditions, this would not be the right time to go ahead with divestment. "I have told the FinMin that this is not the right time for divestment." Backing Moily’s views former oil secretary SC Tripathi said government’s capacity to subsidise is getting limited and after the recent rupee fall it is critical to opt for one-time diesel price hike. He feels there should be a one-time hike of Rs 3/litre in diesel price and oil marketing companies (OMCs) should be allowed to raise prices by Rs 2-3/litre for a month. Gagan Dixit, Oil & Gas Analyst at Quant Broking believes that this move if implemented would be positive for the oil and gas companies especially for OMC stocks. Currently OMCs are making daily losses of somewhere around Rs 380 crore and every Rs 1 diesel price hike would reduce the daily losses at least by 20 crore. “I expect below 300 crore daily losses is a manageable figure. So, Rs 2 diesel hike will help to achieve that as early as possible,” Dixit added. Meanwhile, the Empowered Group of Ministers (EGoM) meeting on gas allocation which was scheduled for today has been postponed.