Fuel price hike is unavoidable, says Jaipal Reddy

NEW DELHI: Oil minister Jaipal Reddy has said a fuel price hike is "unavoidable" but expressed doubts that that matter would be taken up by the cabinet committee on political affairs (CCPA) at its scheduled meeting on Tuesday, which was postponed without citing any reasons.

"I'm not sure whether the item may be taken up today CCPA," Reddy told reporters after meeting finance minister P Chidambaram in Tuesday afternoon, hours before the scheduled meeting of the powerful committee. CCPA, chaired by Prime Minister Manmohan Singh, includes key cabinet ministers and members of UPA allies.

It is not unusual for CCPA to take up an issue, which is not on its agenda, government officials said. Earlier in the day, the market was abuzz with the news that CCPA might recommend raising rates of petrol, diesel and cooking gas as the oil ministry had circulated a note to its members on Monday even though the price hike was not the agenda.

Reddy hinted that the decision could be postponed by a few days. "However, I would like to tell the people in all humility that an increase is unavoidable. We will have to perform our unpleasant duty," he said.

State oil firms are expected to lose more than Rs 188,000 crore revenue on selling diesel, kerosene and cooking gas because of rising international oil prices and the depreciation of rupee, he said. India imports more than 80% of crude oil it processes and pays in dollar. The government has frozen diesel, kerosene and cooking fuel rates since June 2011.

State-run Indian Oil, Hindustan Petroleum and Bharat Petroleum are awaiting the government to raise prices of controlled fuels so that they can hike petrol rates, where revenue losses have mounted to Rs 6 a litre, executives of oil companies said.

"If petrol price is hiked now, there will be stiff political opposition and the government would not be able to raise prices of controlled products. Therefore, we have been asked to wait and announce a petrol price hike simultaneously," one executive said requesting anonymity.

The government decontrolled petrol in June 2010, but state oil firms sell diesel, kerosene and cooking gas at government-determined prices, which are often below market rates.