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Friday, Nov 24, 2006
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Deora: oil price cut only after sustained drop in world markets

Special Correspondent

Government keeping a close watch on volatile prices, he says

New Delhi: The Government will consider cutting petrol and diesel prices when there is a "sustained drop" in international crude oil prices. This was stated by Petroleum Minister Murli Deora in a written reply to a question in the Lok Sabha on Thursday.

Pointing out that international oil prices continue to fluctuate, he said "the Government is keeping a close watch on the volatile prices." Besides, he pointed out that seasonally oil prices were expected to increase during the winter months.

Mr. Deora said the prices of petroleum products were raised on several occasions when crude prices in international markets increased. However, these increases had been less than the hike required for absorbing crude prices in the global markets.

During 2006, retail prices of petrol and diesel had been increased only once. "Retail prices of petrol and diesel were increased only partially and not in line with the then prevailing international oil prices. No increase has been made in retail prices of PDS kerosene and domestic LPG."

The Minister said the Indian basket of crude oil was at about $ 67 a barrel when petrol and diesel prices were last raised in June 2006. It came down to $ 57.26 a barrel in October.

International crude oil prices went up to $ 75 a barrel in August but domestic retail prices were not raised, he said, despite the fact that the June hike had not completely covered surge in international prices.

He said that in the first half of 2006-07, the under-realisation of sale of petrol, diesel, LPG and kerosene was Rs. 33,200 crore. These under-recoveries had been partially met through burden sharing of Rs. 12,000 crore by upstream oil companies and assurance of issue of bonds of Rs. 14,150 crore.

In another written reply, Mr. Deora said oil companies had sought another upward revision in prices of petroleum products in July 2006 when the Indian crude basket touched $ 70.69 a barrel.

"However, the Government did not accede to this proposal. At current prices of $ 57-58 per barrel, oil marketing companies are still incurring under-recovery on diesel, PDS kerosene and domestic LPG," he said.

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