India May Raise Diesel Rates to Cut $44 Billion Loss

Discussion in 'Economy & Infrastructure' started by Someoneforyou, May 30, 2011.

  1. Someoneforyou

    Someoneforyou Regular Member

    Jan 26, 2011
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    India May Raise Diesel Rates to Cut $44 Billion Loss
    India - 27 may 2011

    India may increase diesel, kerosene and cooking gas prices to support state-run refiners facing revenue losses of 2 trillion rupees ($44 billion) this fiscal year, an oil ministry official said today. Energy shares surged.

    A panel of ministers led by Finance Minister Pranab Mukherjee will meet on June 9 and discuss prices following crude oil’s rise, the person said, asking not to be identified before a public announcement.

    Oil & Natural Gas Corp. was the biggest gainer on the benchmark stock index on expectations higher fuel prices will lower its subsidy burden. Mukherjee faces a dilemma as he aims to cut the government’s fuel subsidy bill, which topped 400 billion rupees last year, while curbing consumer prices that jumped 8.66 percent in April.

    “A diesel price increase seems imminent as refiners’ revenue losses are very large and oil prices continue to be high,” D.K. Aggarwal, chairman of SMC Wealth Management Services Ltd., said by telephone from New Delhi. “The government has to balance fiscal deficit, growth, and the immediate monster of inflation.”

    Indian Oil Corp., the nation’s biggest refiner, increased gasoline prices on May 15 for the first time in four months to cut losses from selling fuels below cost. That was less than the required 10.5 rupees a liter, the company said in a statement on May 14.

    Oil Prices

    State-owned ONGC, the nation’s biggest energy explorer, rose 4.6 percent to 274.45 rupees in Mumbai trading today, ending four days of losses. The company sells crude oil at a discount to the state refiners to partly compensate them for below-cost fuel sales.

    Indian Oil rose 1.5 percent to 307.75 rupees at the close in Mumbai compared with a 1.1 percent increase in the benchmark Sensitive Index. Bharat Petroleum Corp. gained 2.1 percent and Hindustan Petroleum Corp. 0.7 percent.

    Reliance Industries Ltd., which operates the world’s biggest refining complex and fuel outlets in India, gained 3.1 percent to 933.85 rupees. The price of diesel sold by Reliance isn’t controlled by the government.

    Crude oil in New York trading has climbed 10 percent this year and reached a high of $113.93 a barrel on April 29, hurting India’s state-run refiners. The July contract on the New York Mercantile Exchange was down 47 cents, or 0.5 percent, at $100.85 a barrel at 10:39 a.m. London time.

    Indian state refiners currently lose 4.8 billion rupees a day selling fuels below cost, according to a statement on the oil ministry’s website. The shortfall is 14.66 rupees a liter on diesel, 28.28 rupees a liter on kerosene and 329.73 a 14.2- kilogram bottle on cooking gas, according to the statement.

    India’s wholesale price index has stayed above 8 percent for 16 consecutive months, according to data compiled by Bloomberg. The nation plans to narrow the fiscal deficit to 4.6 percent of gross domestic product in the year ending March 31, from 5.1 percent in the previous 12 months.

    Source: Bloomberg

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