Oil
Minister S Jaipal Reddy on Friday came out to defend the third price
increase in a year and the first in almost seven months, saying the oil
companies had exhausted all options.
Breaking
his silence over the hike announced by oil companies on Wednesday,
Reddy said: "All political parties including my own party (Congress) are
populist... (but) we cannot run the country on populist sentiments".
State-owned
oil companies had lost over Rs 7,100 crore in last two years on selling
petrol despite having freedom to adjust rates in line with cost and in
April and May this year they lost Rs 2,330 crore.
Sri Lanka,Pakistan and Bangladesh the oil companies of neighboring countries working with market price less than prevalent in India.
"We
are duly conscious of the sense of disturbance among consumers (caused
due to the price rise)," he said adding the hike was necessitated due to
double disaster of devaluation of rupee against the US dollar and
increase in international oil prices.
There
is a downward trend in international oil prices but it would be hasty
to arrive at a conclusion that retail pump prices can be reduced on the
basis of this trend of few days.
"We
are not able to take a definitive view because there is lot of
volatility in value of rupee vis a vis dollar and volatility in prices
of crude oil," he said.
"We
have decided to watch (the situation) for just a few days... and when I
say few days it is days not week... we want to know (if this) is a
stable trend (and) we will come back to you (about a reduction in
rates)," he added.
Asked
about the opposition to the price hike from within his own party, Reddy
said, "The Congress party is also a political party and like all other
political parties (it) doesn't want to advocate unpopular causes even if
they are unequivocal causes".
"This is politics, not physics," he remarked.
"The
government cannot remain indifferent to the people's feelings," he said
as the clamour for a rollback from within the Congress party and its
allies grew louder.
Oil
companies revise petrol prices on 1st and 16th of every month on the
basis of average international oil price and the foreign exchange rate
in the previous fortnight.
Gasoline
price, against which petrol price has been benchmarked, has come down
from USD 124 per barrel (that was the basis of Wednesday's steep hike)
to USD 117 a barrel.
Rupee
has come back from its sub-56 levels to close at 55.37 to a dollar on
Friday but is still lower than Rs 53.17 to a dollar that was taken into
account for the price hike. If it appreciates further, there will be a
scope for price cut.
"I
will take a view what trend is likely to be. I want to have a feel (of
lower oil prices first)," Reddy said. "Rupee has depreciated steeply. We
dont know when it will stop. Therefore I would like to watch (for
sometime)."
Asked
about the timing of the price revision which the oil companies avoided
on the eve of assembly elections in five states including Uttar Pradesh
and announced it only after the government got Budget passed in
Parliament, he said, "Is there a good time for increase in price? There
is no good time".
Reddy
said while the decision to increase the price was harsh and unpleasant,
the hike was warranted due to the poor financial state blue chip oil
companies had landed into.
Reddy
said his ministry has been seeking a meeting of the high-powered
ministerial panel to decide on price of diesel, domestic LPG and
kerosene but no dates have been fixed yet.
The
Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab
Mukherjee has not met in nearly a year. State-owned oil companies
currently lose Rs 512 crore per day on selling diesel, domestic LPG and
kerosene.
Diesel
is currently sold at a loss of Rs 15.35 a litre, kerosene at Rs 32.98
per litre loss and oil firms lose Rs 479 on sale of every 14.2-kg
domestic LPG cylinder.
The
three firms had together lost Rs 138,541 crore in revenue in 2011-12.
This year they are projected to lose a record Rs 193,880 crore.
"They
(PSU oil companies) are among world's Fortune companies. They are our
bluechip companies at the global level. We cannot allow their image to
be adversely affected at any cost," Reddy said.
"Therefore oil marketing companies feel desperate (when they bleed from selling fuel below cost). So do we," he said.
"This decision is unpleasant and harsh (but) was taken by oil marketing companies".
But
the government at this point cannot take a view on forcing a price cut
due to uncertainty about where international oil prices and rupee-dollar
rate will settle, he said.
Reddy said the both Centre and the state government should cut taxes to reduce burden on the common man.
While
the Centre earns Rs 14.78 from sale of every litre of petrol, the state
governments pocket between Rs 12.20 to Rs 19.83 per litre.
Roughly
40 percent of the petrol price is made up of central and state taxes.
He proposed joint consultations between the states and centre to reduce
taxes on not just petrol but also diesel.
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