Oil PSUs bleed due to subsidy burden

Petroleum minister Murli Deora is in a fix. While he is under pressure to raise fuel prices to help public sector oil marketing companies that are bleeding due to rising subsidy burden, he is restrained by the leadership in the Congress party as any such move could affect the common man.

Some of his senior cabinet colleagues are in favour of implementing the Kirit Parikh committee report, which recommends freeing pump prices of petrol and diesel and raising kerosene and cooking gas prices by Rs 6 a litre and Rs 100 per cylinder, respectively.

The oil ministry lost a chance to implement the Parikh committee report, when the finance ministry announced a duty roll back on crude oil and fuel, leading to petrol and diesel prices rising by over Rs 2.5 a litre. This led to the shelving of the report as it was felt that the people couldn’t bear another fuel price hike.

Now the oil ministry is looking for some interim solutions to cut fuel subsidy burden on the companies without resorting to a fuel price hike. Some suggestions under consideration are: restricting the number of subsidised cooking gas cylinders per household per year, reducing kerosene quota of a state in proportion to electrification and duel pricing of diesel. But officials in the ministry say the government will have to resort to a fuel price

hike in the next couple of months, unless the finance ministry announce a fuel subsidy mechanism for the current fiscal year.