India fuel prices likely to rise again

Monday, June 7, 2010, 21:36 by Business Editor

Price controls on fuel are likely to be lifted in India, and that could lead to a rise in fuel prices by next week.

The Empowered Group of Ministers, led by Pranab Mukherjee, Minister of Finance, are likely to decide on the deregulation of petrol prices soon. Also expected is a move to gradually take away the control on LPG and diesel prices. Though the impact of this decision could be cushioned by the dip in global oil prices, this is not expected to go down well politically.

The control of fuel prices meant that the Indian public did not need to be faced with fluctuating prices in accordance to changes in global prices. The government was providing fuel at a fixed rate, regardless of changing global prices. Currently, the Indian public consumes petrol at a rate that is cheaper by approximately Rs 4.50 per litre.

If this new decision is taken on Monday, petrol prices will rise by Rs 3, diesel by Rs 2.50, and domestic LPG rates will be higher by Rs 25-50 and kerosene will also be dearer.

The issue of deregulating fuel prices has been going on for some time now, and the decision to free fuel rates is expected. Currently, due to the control on oil prices, Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum incur a loss of Rs 203 crore every day (selling at below imported cost).

Meanwhile the BJP and the CPI-M have already declared their opposition to any possible move on the government’s part to increase fuel prices. They are concerned about the effect this move would have on inflation and opine that it would hurt the buying power of the common man, and that a decision to this effect would be a clear implication of the UPA government’s failure on the economic front. Together with the ongoing rise of food and inflation, this would be hard for the Indian public to handle, they say.

Petroleum Minister Murli Deora and Finance Minister Pranab Mukherjee have already had talks with the Prime Minister regarding this issue and the word from the Congress party is that a hike in prices is done only when there is no other option before the government. The aim is to ensure that every consumer pays a fair market price for the product the purchase, since the government is unwilling to subsidize the fuel purchases of private buyers or institutions.

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