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Budget 2011-12: OMCs may raise petrol prices by up to Rs 4 a litre this week
March, 01st 2011

State-run oil firms propose to raise petrol prices by up to Rs 4 a litre this week to offset rising crude oil costs as the Budget has ignored their demand to cut duties on the fuel.

The chairmen of at least two state-run oil companies are meeting oil minister S Jaipal Reddy on Tuesday to secure his informal approval, senior oil ministry officials and top executives of the oil firms said requesting anonymity.

The government freed pricing of petrol from its control in June last year, but the three state-run oil companies, that control over 90% of domestic fuel retail market, informally consult the ministry before revising petrol rates.

"We were holding the price-line expecting that the Budget will give duty relief which we were willing to pass to consumers," chairman of an oil company said. The excise duty, a central levy on domestic production on petrol, is Rs 14.35 a litre, 25% of its pump price.

Commenting on the Budget a senior oil ministry official, who requested anonymity, said, "There is a quandary." He said that the empowered group of ministers on fuel pricing would meet soon to review pricing of other commodities such as diesel and cooking gas.

"If prices of Indian basket (average import price) remain over $100 a barrel, the under-recovery (revenue loss) for 2010-11 would be around Rs 80,000 crore," another ministry official said. The average price at which India imports crude oil is about $110 a barrel. India imports 80% of its energy requirement.

Industry experts say that with no relief from the Budget, the oil companies have no choice but to raise petrol price, which was deregulated last year. "The oil & gas industry was expecting a reduction in customs duty rate for crude oil along with rationalisation of other indirect taxes in view of the increasing crude oil prices," PwC India executive director-tax & regulatory services Dharmesh Panchal said.

Oil companies are losing Rs 10.70 a litre on diesel, Rs 21.60 a litre on kerosene and Rs 356.07 on a cooking gas cylinder.

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