Fuel price hike unavoidable in short term: Jaipal Reddy

After ruling out the case of immediate fuel price hike, Oil minister Jaipal Reddy on Tuesday, said that “The Government will have to hike the price of heavily subsidized fuels such as diesel in the short term”, a decision that needs to be taken to rein in burgeoning subsidy bill. Further, the Oil Minister was quick to add that the hike may not be decided by the cabinet committee on political affairs (CCPA) at its meeting later in the evening. However, Reddy added that if the CCPA does not discuss the fuel price issue on Tuesday, it would be taken up at the next meeting of the cabinet committee which takes decision that has wider political ramifications.

The Oil Ministry circulated a note to the members of the CCPA, which is headed by the Prime Minister Manmohan Singh, detailing the crisis created by rise in crude oil prices and fall in value of rupee against the US dollar. Furthermore, although no suggestions have been made on quantum of increase by the Oil Minister, much of the media reports suggest that oil companies will be permitted to hike the price of petrol by as much as Rs 5, and those prices of diesel and kerosene, which are regulated, will also be increased in a week’s time.

Public State Undertaking (PSU) oil firms are losing a record Rs 560 crore per day on the sale of regulated diesel and cooking fuels, and another Rs 16 crore a day on petrol. These firms are losing about Rs 6 per litre on sale of petrol, a commodity which was deregulated from government in June 2010 but rates haven't moved in tandem with the cost.