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Fuel price freedom plan in rough weather! |
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Rising crude oil prices, at around $70 per barrel, may force the government to drop the moves towards deregulating fuel prices. The Petroleum Ministry, which had mooted the proposal, is backtracking now as state-run oil firms demand a hike in petrol and diesel prices to compensate them for the losses resulting from the costlier crude.
The Union cabinet is expected to meet shortly to deliberate on the fuel pricing issue, including the oil ministry’s earlier proposal of deregulation as well as one on hiking prices by Rs 2 for petrol and Rs 1 for diesel.
PSU oil firms — Indian Oil, Hindustan Petroleum and Bharat Petroleum — are losing Rs 3.10 per litre of petrol, Rs 12 per litre of kerosene and Rs 60 per domestic LPG cylinder.
There is profit still on diesel — just 5 paise now from 32 paise in the middle of May. If the crude surge continues, the losses will pile up.
The new government was caught in a piquant situation. If it allowed deregulation, the oil firms will hike petrol and diesel prices.
On the other hand, if the cabinet decides to raise prices, it will be an unpopular move not only because the masses have enthusiastically voted back the Congress-led UPA to power but also the new government has barely started functioning and is some distance away from completing the customary honeymoon period of 100 days.
From its peak of $142 a barrel in July last year, crude prices have touched a low of $32.40 in December. At the time of the last cuts in petrol, diesel and LPG prices in January, crude averaged $42.12 a barrel.
With signs of a demand revival becoming apparent in major consuming economies such as China and India, crude has started firming up.
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