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    Oil firms threaten to raise petrol price
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    Apr 2011


    Default Oil firms threaten to raise petrol price

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    State-run oil companies have served an ultimatum to the government that they will raise petrol prices by Rs 9.6 a litre if excise duty is not cut or they are not provided compensation for Rs 49-crore-per-day loss on fuel sale.

    "We have been very patient, not raising prices since December despite our cost of production spiralling. But there is a limit to which we can borrow money and produce fuel for the country," Indian Oil Corp Chairman RS Butola said.

    IOC, together with Hindustan Petroleum and Bharat Petroleum, is losing Rs 49 crore per day on petrol sale alone.

    They are losing another Rs 573 crore every day on selling diesel, domestic LPG and kerosene below cost.

    Butola said oil PSUs in the first 15 days of April lost Rs 745 crore in revenue on petrol, whose pricing was freed from the government control in June 2010. But rarely have the product prices moved in tandem with cost as oil companies bowed to government diktats.

    "We have suggested that the government should temporarily end deregulation and give subsidy to make up for the difference between cost of production and sale price. Alternatively, the government can cut the Rs 14.78 excise duty it collects when a consumer buys one litre of petrol," he said.

    The states also levy VAT or sales tax ranging from 15 per cent to 33 per cent (Rs 10.30 a litre to Rs 18.74 per litre), which too can be cut to avoid a price hike.

    If the suggestions are not accepted "we would have no option but to increase the price of petrol by Rs 8.04 per litre (excluding state levies) with immediate effect", he said. After including 20 per cent VAT, the increase in Delhi will come to Rs 9.60 a litre.



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