Three state-owned oil marketing companies (OMCs) Tuesday asked the government to temporarily declare petrol as a regulated commodity, reduce state sales tax and provide hundred percent cash compensation to them as they will be unable to sustain the current prices.
"The company, along with other OMCs have requested the government to declare MS (motor spirit) as a regulated product temporarily and provide hundred percent cash compensation to the OMCs," Indian Oil Corporation (IOC), the largest of the three OMCs, said in a statement.
The government had deregulated petrol pricing since June 2010 but continues to control and subsidise the prices of diesel, kerosene and cooking gas.
"Continuation of such pricing will only impede the ability of the company to import crude oil and may affect product supply-demand balance; or else the company increases the price of petrol by Rs.8.04 per litre (excluding state levies) with immediate effect."
"The company is awaiting for government's response to its requests and should no relief come forward, it will have no option but to effect the aforesaid increase in MS prices," IOC said.
The OMCs say they have together suffered under-recoveries of Rs.745 crore in the first 15 days of the current fiscal. Their inability to raise prices from Dec 16, 2011 to March 31, 2012 has resulted in total under-recovery of Rs.2,287 crore.
There has been a question mark on the real status of petrol as a de-regulated commodity as the government claims that prices are ruled by market forces but is allegedly forcing the OMCs to bleed.
The OMCs had last revised the petrol price in December last year by reducing Rs.0.65 per litre as international MS prices fell to $109.03 a barrel. Currently, the international MS prices have gone up and now stand at $132.45 per barrel.
Earlier in the day, the Reserve Bank of India (RBI) in its annual monetary policy statement for 2012-13 suggested raising petrol, diesel, kerosene and LPG prices to cut the fiscal deficit.
"From the perspective of vulnerabilities emerging from the fiscal and current account deficits. It is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true costs of production," said RBI Governor D.Subbarao.
RBI further said that the budgetary oil subsidy of Rs.40,000 crore for 2012-13 is likely to fall significantly short of the required amount.
"Containment of non-plan expenditure within budget estimates for 2012-13 is contingent upon the government's ability to adhere to its commitment of capping subsidies," Subbarao said.