[pharmacologist30]

Brace yourself for another hike in the prices of petrol, diesel and LPG this month. With elections in key states ending next week, the eGoM on fuel prices headed by the finance minister is scheduled to meet on May 11 to discuss the hike in diesel prices.

While petrol prices were deregulated in June 2010, he PSU oil marketing firms were not allowed to hike petrol prices for some time as this could have evoked negative reaction from the electorate during the assembly elections.

Now, PSU oil marketing firms are expected to hike he prices of petrol this month. Sources say that the government is mulling a Rs.28 a litre on kerosene and Rs.329.73 per 14.2 kg on domestic LPG cylinders.

The firms are losing Rs.8.50 per litre on petrol despite it being deregulated last year.

The hike in fuel prices is likely to push inflation upwards. Factoring the fuel price hike, RBI had said that inflation will remain elevated, close to the March 2011 level, (which was at 8.98 per cent) over the first half of 2011-12, before declining.

If the Centre does not hike the prices of petroleum products, the finance minister will not be able to meet the target of reducing the fiscal deficit to 4.6 per cent in 2011-12. In the Budget, Mr Mukherjee, had kept the subsidy for petroleum products at Rs.23,600 crore, which in the present situation looks to over shoot.

Rs.3-4 hike in diesel and petrol prices and a Rs.30 hike in the prices of domestic LPG.
The eGoM will look at steps to be taken as oil marketing firms face over Rs.1,80,000 crore losses in revenues for 2011-12 on the sale of diesel, LPG and kerosene at subsided rates.

Credit: DC Chennai