Govt to protect consumers from very high fuel prices

Petroleum minister Murli Deora on Friday said the government will intervene to protect consumers from very high petroleum prices if oil companies decide to do so. He sought to stave off the Opposition's criticism of fuel price increases with the argument that kerosene and LPG prices in the country were among the lowest in the world.

"The government will not be a silent spectator. In case any company or oil dealer charges very high prices, we will intervene," said Deora who inaugurated Indian Oil Corporation's (IOC (IOC.NS : 401.3 +1.3)) new Chennai-Bangalore pipeline in Bangalore.

Asked if the oil companies would henceforth consult the government while changing petrol prices, he said, "We will protect the consumer at that time. Whenever there is an abnormal increase in the prices, even in the case of petrol, the government will step in."

"Our neighbouring countries are charging twice the price for a LPG cylinder of the same weight as in India," said S Sundareshan, petroleum secretary. "So, in spite of the price increase we are still the cheapest in the world, among oil importing countries."

The government was losing Rs 15 and Rs 2.62 per litre of kerosene and diesel respectively and Rs 225 per cylinder of LPG despite the price increase, he said. In the case of diesel, the government would bear a Rs 23,000 crore burden to compensate oil marketing companies for their losses despite increasing the price by Rs 2 a litre, Deora said.

"The actual price increase (of diesel) should have been Rs 4," Deora added, pointing out that the total deficit for companies would touch Rs 53,000 crore.

"We would not like to revise the prices frequently," said B M Bansal, chairman, Indian Oil Corporation Ltd. "If the prices are stable maybe we will look for monthly revision. But we have not decided yet."

Asked if the government would divest stake in some of the oil marketing companies, Sundareshan said there was scope for divestment only in Indian Oil Corporation and Oil and Natural gas Corporation Ltd (ONGC.NS : 1306.3 +4) (ONGC) where the government holds about 74% stake.

According to IOC's Bansal, the de-regulation of petrol prices will help reduce the company's borrowing as there will not be uncertainty over compensation for losses by the government. "This will reduce the loan amount and interest rates because now the banks will be assured that we are getting the cash flow continuously," he said.

Opposition parties are threatening a strike next week, protesting the recent hike in the price of petroleum, diesel, kerosene and LPG.

Source : Yahoo Finance
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