The finance ministry has advocated an increase in auto and cooking fuel prices only after the Budget is tabled in Parliament on February 26 in an effort to avert possible united protests from the United Progressive Alliance’s non-Congress allies and opposition parties ahead of a busy opening week of Parliament.

Parliament opens on February 22 and the first week will see the presentation of the Economic Survey and two Budgets (Railway and general).

Although the Congress has conceded that a price rise is inevitable given the rising subsidy the government is paying state-owned oil companies to sell fuel below market price, the final decision on the issue will be taken by Prime Minister Manmohan Singh and Congress president Sonia Gandhi.

The thinking goes that the second general budget of the UPA’s second term is likely to contain sops for the aam aadmi, and these could provide a cushioning effect before the harsh political decision for a fuel price rise is announced.

Apart from managing the political consensus within the UPA, the government is concerned that the inflationary impact of a fuel price rise may also raise strong opposition protest. Petroleum products as a group have a weight of 14.2 per cent in the wholesale price index.

The issue of raising auto and cooking fuel prices came up two weeks ago after an expert group on petroleum pricing headed by Kirit Parikh had suggested market pricing for auto fuels, a Rs 100 per cylinder increase for LPG and a Rs 6 a litre for kerosene .

Though petroleum minister Murli Deora had earlier said the committee’s report would be presented to Cabinet, the issue did not come up for discussion in last week’s Cabinet meeting and is not on tomorrow’s agenda either.

“No decision on the announcement of a fuel price hike has been taken,” a top finance ministry official told Business Standard on Tuesday.

The ruling Congress is yet to get the endorsement of key allies in the second UPA — Mamata Banerjee’s Trinamool Congress and M Karunanidhi’s Dravida Munnetrak Kazhagam (DMK) with 17 and 19 Lok Sabha MPs respectively — on this issue.

Both parties have threatened protests against any move to raise oil prices given current levels of inflation. Deora, however, has already discussed the issue with other UPA constituents.

A UPA manager also pointed out that Parliament is about to start and the Economic Survey and the general and the railway budgets need to be tabled in the first few days. If the fuel price hike is announced now it might unite the entire opposition against the government from the very beginning.

Deora met Finance Minister Pranab Mukherjee last Sunday on the issue but failed to reach a consensus.

Deora also wanted the finance ministry to help meet the Rs 31,574 crore loss of Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) for selling LPG and kerosene at subsidised prices. The finance ministry has so far committed only a Rs 12,000 crore cash subsidy.

Public sector oil distribution companies have projected a loss of Rs 45,570 crore on selling petrol, diesel, domestic LPG and kerosene below market prices.

The state-owned oil marketing companies are losing Rs 4.63 a litre on petrol, Rs 1.89 a litre on diesel, Rs 18.06 per litre of kerosene and Rs 287.59 on every domestic LPG cylinder.

source: Business Standard

Tags: fuel price hike, petrol price hike

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