The government on Tuesday ruled out any further increase in diesel and cooking fuel prices even though the current retail rates are lower than their cost of production.
"I am not so courageous," Oil Minister S Jaipal Reddy said when asked if the Government will consider raising prices considering the humongous Rs 167,000 crore revenue loss on diesel, cooking gas (LPG) and kerosene sale expected this fiscal.
The government had last month hiked diesel price by a steep Rs 5.62 per litre and restricted the supply of subsidised LPG to 6 cylinders per household in a year.
Oil PSUs currently lose Rs 11.65 per litre on diesel, Rs 33.93 on kerosene sold through PDS and Rs 468.50 per 14.2-kg domestic cooking gas cylinder.
"Even after these recent increases, the under-recoveries (or revenue loss) this financial year will be higher than it was last year," Reddy said, adding oil firms are projected to lose Rs 167,415 crore this fiscal as compared to Rs 138,541 crore revenue loss in 2011-12.
"There is a need to raise prices but not courage," he said.
Even on petrol, a commodity which the government had freed from its control in June 2010, the oil firms have lost Rs 2,600 crore during the first six months as they could not raise rates in line with the cost.
Oil firms have cut petrol price by 56 paisa from today and the Oil Minister said it was totally up to them to decide on the next reduction whenever it is possible.
Reddy said the nation has faced the double whammy of rising price of oil in the international market, on which India is 79 per cent dependent to meet its needs, and depreciation in the rupee against the US dollar that made imports costlier.
The price of basket of crude oil that India imports has risen from USD 85.09 per barrel in 2010-11 to USD 111.89 in 2011-12, Reddy said.
Rupee value against the US dollar dipped from Rs 44.42 to a US dollar in July 2011 to Rs 57.22 in June this year.
"Between July 2011 and October this year, the Indian currency has devalued against the US dollar by 16.34 per cent," he said, adding depreciation of rupee by one against the US dollar results in a burden of Rs 9,000 crore annually.
Reddy said the oil firms lost Rs 90,011 crore on sale of diesel, LPG and kerosene in April-September this year.
Of this, Rs 47,811 crore was lost in first quarter. Upstream firms like ONGC made good Rs 15,061 crore by way of discount on crude oil they sell to refiners. The remaining is the amount that remains to be compensated by the Finance Ministry.
In Q2, Rs 42,200 crore was the revenue loss and upstream firms are likely to chip in Rs 14,000-15,000 crore. The rest would have to come from the Finance Ministry.
Reddy said the Finance Ministry, before releasing the subsidy for the two quarters wants to scrutinise the numbers as they had done in past years.
"We welcome them to do it," he said, adding in 2007-08 the oil companies calculated Rs 77,000 crore as the subsidy requirement using the principle of import parity pricing. The Finance Ministry used cost-plus formula to arrive at Rs 70,000 crore figure.
In the subsequent year, oil firms calculated Rs 103,000 crore by their formula and Finance Ministry arrived at Rs 105,000 crore.
"The difference between the two is not very significant. However, Finance Ministry always has the right to scrutinise it and we have always welcomed it," he added.
Oil Secretary G C Chaturvedi said state-owned oil firms have submitted all data on the calculations for under-recoveries or revenue losses in the first two quarters to the Finance Ministry.
The subsidy, he said, would be released once Finance ministry completes the exercise.
The Oil Ministry had sought cash subsidy of Rs 32,750 crore for the first quarter but the Finance Ministry has not released any.
In the absence of the subsidy support, IOC reported the highest quarterly net loss by any Indian company at Rs 22,451 crore for April-June. HPCL posted Rs 9,249 crore net loss in April-June while BPCL reported a net loss of Rs 8,836 crore for the first quarter.
Oil firms would most likely post net losses even in the second quarter as the logjam in Parliament over coal block allocation has meant that supplementary demands for grants are not approved and no subsidy payout is possible till the next winter session of Parliament in December/January.
"Despite these measures (raising diesel prices and restricting supply of subsidised LPG) the under-recoveries of oil marketing companies for the year 2012-13 are projected to be around Rs 167,415 crore. Nevertheless, I do hope these difficult steps would help to contain the fiscal deficit and make scarce resources available to priority sectors," Reddy said.