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LPG cylinder may get costlier by up to Rs 100

The govt will, however, take a decision on Wednesday only after weighing political implications of a hike against the need to shore up finances of oil companies.

, ET Bureau|
Dec 20, 2010, 12.13 AM IST
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NEW DELHI: The oil ministry plans to raise cooking gas prices by Rs 50-100 per cylinder as the international price of liquefied petroleum gas has jumped by almost 66% since August. The rise in global prices is hurting state-run oil firms as India imports 3 million tonnes of LPG a year.

The government will, however, take a decision on Wednesday only after weighing the political implications of a hike against the need to shore up the finances of companies such as Indian Oil Corp, which plans to raise Rs 20,000 crore from a public issue in 2011.

International price of LPG has soared due to winter demand, and consequently the subsidy on every cylinder is set to jump to Rs 367 per refill from January 1, which is more than the retail price of Rs 345.35 in the Capital, two officials with direct knowledge of the matter said.

The oil ministry will seek the approval of the empowered group of ministers (EGoM), which is also expected to consider higher diesel rates, when it meets on Wednesday, officials said.

“We can’t tell the quantum of price hikes (of cooking gas and diesel) as the EGoM is the deciding authority. We will merely place facts before it,” an oil ministry official said. The decisions of the EGoM are final and do not require the cabinet’s nod.

India, the largest consumer of LPG in Southeast Asia, meets its domestic demand by importing about 3 million tonnes of cooking gas. The Petroleum Planning & Analysis Cell, an arm of the oil ministry, estimates domestic LPG demand at 14 million tonnes in 2010-11. The country’s dependence on LPG imports is increasing due to a 5-8% annual growth in consumption.

State-run oil companies are selling cooking gas at Rs 345.35 per cylinder in New Delhi. Their losses on its sale, compared with international rates, will jump to about Rs 367 per cylinder from January 1 as the import price of LPG for the next month has soared, officials said. State-run oil companies declined to provide rates at which they are importing LPG cargoes next month, terming it a commercial secret.

Global LPG price, which was less than $600 a tonne in August, has touched around $1,000 a tonne and is still rising, an expert at a state-owned oil firm said, requesting anonymity.

Oilcos losing Rs 5/litre on diesel

LPG is a mixture of propane and butane. The mixture is predominantly propane in winter and butane in summer. As per reports, Algerian firm Sonatrach’s December selling price for propane was $925 per tonne, while it was selling butane for $985 per tonne. Sonatrach is the world’s third-largest LPG exporter.

Oil firms raised petrol prices by about Rs 3 per litre last week, but they do not have the freedom to raise prices of diesel, cooking gas and kerosene. State-run firms IOC, BPCL and HPCL are losing about Rs 5 on every litre of diesel.

Diesel and LPG rates have not been changed since June-end although the cost of crude oil has risen 18%, putting severe strain on the finances of oil companies as diesel and cooking gas accounts for about 60% of all petro products sold in the country. A fuel price hike is also important to lift the finances of Indian Oil and ONGC, which share the subsidy burden with the government, before their `30,000-crore equity issues.

On December 1, oil minister Murli Deora had told a parliamentary panel that oil marketing companies’ revenue losses were expected to rise to about Rs 65,000 crore in 2010-11, about 23% more than what was estimated two months earlier.

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