The much-feared hike in oil prices is off for the moment but do not open the champagne. It may come any time soon. This has been done presumably due to the fear of criticism expected, apart from the current mess which the government has landed in over the coalgate scandal.
Earlier, the oil ministry had agreed to the demands of Oil Marketing Firms (OMCs) on a price hike. With the political sanction in place, the hike is only a question of timing now.
The OMCs have indicated an increase of Rs.4 to Rs.5 per litre. The PMO and finance ministry have also backed the hike. To worsen the matters, a hike in other petroleum products including diesel and LPG is expected to follow soon.
Oil firms are currently losing Rs.19.26 a litre on diesel and Rs.347 per cylinder of LPG. Prices of both these products have not been increased since June last year, although the cost of production has jumped nearly 28 %.
OMCs are losing Rs.560 crore a day on diesel and LPG sales and have to resort to short-term borrowings to import the crude oil (raw material). Besides, there is a loss of Rs.5 per litre on petrol, that was decontrolled in June 2010 but its rates haven't moved in line with its cost.
At the current rate, the three OMCs are projected to lose Rs.1,92,951 crore in the current financial year.