Will 'imminent' price hike in diesel, cooking gas happen in June?

Will June finally be the month in which prices of diesel, cooking gas and kerosene will be raised?

We’’ve been hearing about an ‘imminent’ price hike in fuel prices in March, April and May.

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Speaking to the Lok Sabha on Tuesday, finance minister Pranab Mukherjee made it clear that the path was being cleared for an oil price hike soon as he emphasised that the current level of oil subsidies is unsustainable. The under-recoveries bill (losses made by oil companies on selling price-controlled petroleum products) could reach Rs 2 lakh crore for the current financial year if crude oil prices do not come down. Mukherjee said the increase in prices would partly be passed on to consumers while also being shared by state governments. But the Centre was not in a position to compensate anymore.

Even the oil ministry is rooting for a price hike as it is getting increasingly difficult for oil marketing companies - HPCL, BPCL and IOC - to survive. The loss, or under-recovery, on every litre of diesel (whose prices are controlled) has climbed from Rs 5 in July last year to Rs 14 now.

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It’s possible that the Centre might also ask states to cut ad-valorem taxes at the state level to bring down prices for consumers, on the lines of what Goa did. The coastal state recently cut value-added tax on petrol, which brought down the retail price by Rs 11 per litre.

With the Budget session ending on 22 May, June could be an ideal time to announce the hike. Business Standard quotes RS Sharma, former ONGC chairman and current chairman of the Ficci Hydrocarbon Committee as saying that “June is a lull period in terms of political activity. As there is no Parliament session, reactions will be muted if a price hike is done during June.”

Even Prime Minister Manmohan Singh hinted at an imminent price hike at an event hosted by HPCL recently. He said that while the poor had to be shielded from high oil prices, India’s high crude oil import bills made it imperative to rationalise prices and avoid energy wastage.

Don’t blame weary oil companies if they aren’t convinced, though. Hindustan Times quotesa senior official at Indian Oil Corporation as saying, “We have been hearing this intention of the government for a long time. “There’s also not much faith on states doing their part either. “We are awaiting concrete action on states pitching in by reducing taxes,” he added.

Better late than never.