Govt under pressure to hike fuel prices

Here in India, public sector oil marketing companies unleashed a slew of measures to protect their turf given the Government's reluctance to help them limit the damage from the grim business scenario. According to reports, state-run OMCs suspended new LPG connections, curtailed fuel supplies to dealers and increased the sale of branded fuels to cut their losses. HPCL reportedly warned the Government of huge losses for the year while Numaligarh Refinery - a BPCL JV with the Assam Govt - said it will cut supply to dealers by the end of the month. The Government, however said the steps taken by OMCs did not have its stamp of approval. Petroleum Minister Murli Deora met the Prime Minister and sought his help in tiding over the crisis, while the Petroleum Secretary held a meeting with OMC's head honchos to discuss various options at their disposal.

The Cabinet did meet on Friday, but didn't take any decision on fuel price hike. The Petroleum Secretary said the Cabinet will take a call on fuel prices over the nest few days. The Petroleum Ministry is seeking a Rs10 per litre increase in petrol and Rs5 a litre hike in diesel prices along with cut in customs and excise duties to curb the impact of surging crude prices. Whether its demand is met or not only time will tell. Even a small hike in fuel prices is bound to generate a lot of hue and cry. The Government is in a major bind as any increase in fuel prices will lift inflation, which crossed 8% in the week ended March 15 (revised). On the other hand, a status quo will mean more blood letting for the oil companies. The most likely scenario is that the Centre will go for a small hike fuel prices, and may also tweak duties and ask upstream companies like ONGC to share more burden of the under-recoveries.