Fuel prices to be cut in a week

In what could be a Diwali gift for the common man, government on Thursday said in the Lok Sabha that an announcement on reduction of fuel prices will be made within a week, keeping in view the falling global crude prices.

"The matter is being examined and an announcement would be made within a week," Petroleum Minister Murli Deora said during Question Hour in reply to a spate of supplementaries on the issue as Opposition members insisted that the fuel prices be brought down forthwith.

Global crude prices have come down below $67 a barrel from a high of $147 and now the government should live upto its promise and reduce prices of petroleum products, the members said.

Deora also faced wrath of members over the 'bailout' package to airlines at the cost of the common man. The petroleum minister and the Civil Aviation Minister Praful Patel denied that any bailout has been given and said only deferment of outstandings has been allowed.

To a question from BSP's Brajesh Pathak whether the government will give free diesel to farmers, Deora pointed out that even now, huge subsidy was being given on various petroleum products. He said the question was 'wrong'.

But members of the BSP, Left and the NDA were in no mood to listen and they staged a noisy walkout.

Earlier this week, Finance Minister P Chidambaram had said in the Lok Sabha that India's administered prices of petrol, diesel, LPG and kerosene were based on Indian basket at $67 a barrel.

When price comes down to $67 a barrel, then oil companies are breaking even, Chidambaram had said.

BJD member Braj Kishore Tripathy asked, "What is the policy of the government when global crude prices have declined."

Deora said the government was waiting for further reduction in global crude prices and would consider the matter later. But as members got agitated and wanted an immediate response, he said a decision would be announced within a week.

Emphasising that state-run oil firms continue to make losses on fuel sales, Murli Deora said government will watch for the impact of OPECs decision on Friday on global oil rates before deciding on revision petrol, diesel and domestic LPG prices.

"We are watching international oil price scenario very closely. OPEC is meeting tomorrow (to decide on cutting its output in view of fall in prices) and we will see what happens (to oil prices)," Deora told PTI.

While international crude oil prices have fallen from the highs of $147 a barrel in July, a sharp depreciation in the value of Indian rupee against the US dollar has wiped away some of the gains.

Indian Oil, Bharat Petroleum and Hindustan Petroleum were to break even on sale of petrol, diesel, domestic LPG and kerosene at $67 per barrel crude oil when $1 was equivalent to Rs 41.

However with rupee almost kissing the 50 mark, the break even point has now shifted to $57 per barrel. At Wednesday's level of Rs 49.29 against a US dollar, the break even point is $59.

The basket of crude India buy on Wednesday averaged at $61.47 per barrel and in second fortnight of October, it has averaged to $65.71 a barrel. "In spite of fall in oil prices, which is a welcome development, we are still incurring losses," Deora said.

Oil retailers sell petrol at a loss of Rs 2.41 a litre, diesel at Rs 6.42 per litre, kerosene at Rs 28.07 per litre and domestic LPG at a loss of Rs 344.72 per cylinder. The three firms in April-September lost Rs 92,853 crore (Rs 928.53 billion) on fuel sales (audited figures) and are projected to lose Rs 147,486 crore (Rs 1474.86 billion) in the full fiscal.

"I have not said that we will next week decide on reducing prices. All I have said is that we will next week review (the situation emerging from OPECs decision)," Deora said.

Energy ministers of 12-member oil cartel Organisation of Petroleum Exporting Countries (OPEC), which accounts for 40 per cent of global crude oil production, are meeting tomorrow to review the present international oil price situation and it is widely expected that they would decide to curtail oil production, which may again lead to a rise in international oil prices.

A Petroleum Ministry official said cutting fuel prices now will widen the revenue loss of state-run firms. "I don't see a trigger, unless political, for a reduction in fuel prices."

"For a price cut to happen, international oil prices have to sustain at levels lower than the break even point, for at least a month. We cannot be seen lowering the prices on one day's fluctuations. Tomorrow, if the prices go up, will the oil companies be allowed to raise prices," he said.

Deora is believed to have met Prime Minister Manmohan Singh on the issue earlier this week and had been advised to wait for international oil prices to fall further before taking the issue to the Cabinet.

Every time the US dollar becomes dearer by one rupee, the revenue loss on fuel sales jumps by Rs 8,500 crore (Rs 85 billion).

No shortage of LPG

The government on Thursday said there is no shortage of domestic LPG in the country even as it admitted of supply backlog of few days in some southern and western states.

"There is no overall shortage of LPG in the country and LPG supplies to distributors are being made... in accordance with the genuine demand of customers," Petroleum Minister Murli Deora informed the Lok Sabha.

Backlog of 1-2 days in LPG supplies existed in Karnataka, Kerala, Maharashtra, Rajasthan and Tamil Nadu and 3-4 days in West Bengal. This was "mainly because of spurt in demand due to festive season," he said in a written reply to a question.

"The government has advised oil marketing companies (OMCs) to liquidate the backlog in the states by operating the bottling plants on holidays and during extended hours," Deora said.

"All necessary steps have also been taken by the OMCs to ensure that the supply and distribution chain of LPG is maintained to meet the public satisfaction."

The Minister said as indigenous production of LPG was inadequate to meet demand, the cooking fuel was being imported. In April-August 7,88,000 tonnes of LPG was imported. During 2007-08, 2.82 million tonnes of LPG was imported.

With regard to black-marketing of the fuel, Deora said the possibility of black marketing of subsidised LPG cylinders cannot be ruled out "due to the wide gap between the retail price of LPG for domestic use and the market price for commercial LPG".

The government would take strict penal action against LPG distributors found indulging in black marketing of the fuel. Distributors have been instructed to check the weight of cylinders before delivery.