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Fuel Prices to go Up
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  1. #1
    Super Admin MN's Avatar
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    Angry Fuel Prices to go Up

    This is not good news at all!

    NEW DELHI (Reuters) - The finance and oil ministries are lobbying for an increase in prices of diesel, kerosene and LPG, warning cabinet colleagues that time is running out to avert a fiscal disaster and a sovereign credit downgrade to junk by global ratings agencies.

    "The situation is very, very serious," a finance ministry official involved in the fuel price discussions told Reuters.

    "We may need up to 50,000 crore (500 billion Indian rupees or $8.99 billion) if there is no diesel price hike, leaving the fiscal deficit near 6 percent," he said. He declined to be identified due to the sensitivity of the issue.

    The cabinet committee on political affairs, headed by Prime Minister Manmohan Singh, will make the final call on the hikes as early as next week after the oil ministry recommended the changes in a note this week, sources in the two ministries said.

    The ministries have long advocated slashing subsidies on fuels like diesel that eat into the budget and affect the financial health of state-run oil companies. But fears of a popular backlash has stopped the government raising prices for more than a year.

    The ministries are piling on the pressure now to try and squeeze the price rise through after the current parliament session ends on Friday and before a round of state elections begin at the end of the year.

    "A sense of urgency is keenly felt by everybody right from the prime minister," a top oil ministry official told reporters.

    Senior advisers to Finance Minister P. Chidambaram last week outlined the implications of raising diesel and other fuel prices for inflation and the fiscal deficit. The ministry is pushing for a rise of Rs 3-5 per litre in diesel prices and significant increases for LPG and kerosene.

    "We have told him even a hike of one rupee per litre in diesel prices would bring down the finance ministry's oil subsidy burden by nearly 55 billion rupees besides helping the oil marketing companies to cut losses," said the finance ministry official.

    The finance minister's immediate aim is to avert a downgrade that would make India the first country in the BRICS group - which also includes Brazil, Russia, China, and South Africa - to trade at junk, the official said. Ratings agencies Fitch and Standard & Poors warned earlier this year that a widening deficit had put India on the brink of losing investment grade.

    Chidambaram also wants to convince the Reserve Bank of India (RBI) to lower interest rates. RBI Governor Duvvuri Subbarao also wants the government to rein in subsidies to check the ballooning deficit.

    Another finance ministry official said an increase in the price of diesel, which accounts for more than 40 percent of all oil products consumption, would generate a short-term rise in inflation, but help bring down the fiscal deficit.

    A fall in the fiscal deficit will boost private investment in the economy and ease inflation in the long term, he said.

    The official said a slight cooling of headline inflation, which fell to a near three year low in July is also helping the case for tackling subsidies now.

    LOSSES

    The three state-run fuel retailers -- Indian Oil Corp (IOC.NS), Bharat Petroleum Corp (BPCL.NS) and Hindustan Petroleum Corp (HPCL.NS) -- have together racked up losses of 405.4 billion rupees in their fiscal first quarter, four times the loss from a year earlier.

    They say they incur revenue loss of 17.05 rupees and 32.70 rupees on sale of a litre of diesel and kerosene, and 347 rupees on the sale of a 14.2 kg cylinder of cooking gas or liquefied petroleum gas, adding up to $99 million a day of losses.

    Even after a rise in diesel prices by 3-5 rupees per litre, the government would need 250-300 billion rupees to compensate oil firms at current global crude prices, said the second official in finance ministry.

    Brent crude, which fell to nearly $94 a barrel in June end, has again climbed to over $113 a barrel.

    The rupee, which has depreciated by nearly 9 percent since March, has further complicated matters, as oil firms had to spend more to buy crude despite the fall in crude prices.

    "It is high time we should raise prices because our revenue losses have mounted," said BPCL Chairman R. K. Singh.
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  2. #2
    Respected Member pradeep's Avatar
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    If there are NO 40,000 cr INR loss in commonwealth games,
    If there are NO 1,76,000 cr INR loss in 2G games,
    If there are NO 1,80,000 cr INR loss in coal allocation games,

    Just Imagine the price......voters are the fools.
    Thanks & Happy revving,

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  3. #3
    Moderator VivekRj.Dieselhead's Avatar
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    Quote Originally Posted by pradeep View Post
    If there are NO 40,000 cr INR loss in commonwealth games,
    If there are NO 1,76,000 cr INR loss in 2G games,
    If there are NO 1,80,000 cr INR loss in coal allocation games,

    Just Imagine the price......voters are the fools.
    I Agree With You buddy.

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    He he he! We all know it, but cant help much. Thats how it goes on in India.

    Fuel hikes? Very HONESTLY, on a personal front I am not too bothered because of the MJD. But, there are so many lives that get affected due to this. That makes me feel very sad.

  5. #5
    Moderator VivekRj.Dieselhead's Avatar
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    Quote Originally Posted by karthik View Post
    He he he! We all know it, but cant help much. Thats how it goes on in India.

    Fuel hikes? Very HONESTLY, on a personal front I am not too bothered because of the MJD. But, there are so many lives that get affected due to this. That makes me feel very sad.
    Bro, as far as travelling is a concern i also don't have any problem, but diesel price hike will increase the prices of everything from milk to pulses. Which would really be horrible as everything is already very expensive.

  6. #6
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    ^ Yes, I meant the same in 2nd part of the statement. I wasnt strong/clear enough

  7. #7
    Moderator torquey_tnd's Avatar
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    FIAT's must come up with some alternates
    LPG Kits - but thats by a long shot away -

    Owners in Major metro's Mumbai , Bangy etc are paying heavily through their NOSE !


    Cheers
    TND
    The Stig's Indian Cousin !!!
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  8. #8
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    If there is steep hike in Diesel by Rs 4 - 5, that might trigger to Bharath Bandh for a day

    Its really frustrating when you see Inflation growing at a rapid speed

    Personally, I already had a pinch of it - all these days I used fuel my vehicles in Shell, when I came to know that they have raised the Petrol price by almost Rs 6 now, which makes it around Rs.82 p/l. I switched to trust worthy HP bunk to fuel my vehicles.
    Chetu Munna.

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  9. #9
    Moderator torquey_tnd's Avatar
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    Quote Originally Posted by Greenday View Post

    all these days I used fuel my vehicles in Shell, when I came to know that they have raised the Petrol price by almost Rs 6 now, which makes it around Rs.82 p/l. I switched to trust worthy HP bunk to fuel my vehicles.
    +1 , Thats one of the reason's Mumbai being a metro city, We had one dedicated Shell Bunk @ Bandra
    closed few yrs back.

    AFAIK , Mumbai now has NONE !

    It makes complete sense to switch over to Regular 91 ron fuel from reputed pumps, loose the shell !

    Cheers
    TND
    The Stig's Indian Cousin !!!
    ROYAL ENFIELD - FIAT - YAMAHA

  10. #10
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    Here is a Strategic Time-out.

    Fuel prices won't be hiked, for now

    goo.gl/zVXVJ
    Chetu Munna.

    I am being CAR JACKED by my own CAR!!!

    1985 - Vijai Super
    1989 - Premier 118NE
    2002 - Suzuki Fiero
    2010 - Fiat Palio

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