A ministerial group on Monday deferred a decision on freeing petrol and diesel prices from government control for want of quorum, but discussed the impact of such a move on inflation.
Freeing petrol and diesel prices would mean an up to Rs 3.50 a litre hike in rates of these fuels, and this could send wholesale prices-based inflation up by 1.4 percentage points. Annual inflation was 9.59 per cent in April, mainly on account of high food prices.
"We had a very good meeting but because of ministers not being present, no decision was taken. We will meet again soon," Oil Secretary S Sundareshan said after the meeting chaired by Finance Minister Pranab Mukherjee.
Besides Mukherjee, the meeting was attended by Planning Commission Deputy Chairman Montek Singh Ahluwalia, Fertiliser Minister M K Alagiri, Oil Minister Murli Deora and Cabinet Secretary K M Chandrasekhar.
Railway Minister Mamata Banerjee, Agriculture and Food Minister Sharad Pawar, Road Transport Minister Kamal Nath and Power Minister Sushilkumar Shinde were not present.
The oil ministry made a presentation to the eGoM on the recommendations of the Kirit Parikh Committee that suggested freeing fuel prices from government control. Oil companies have been selling fuel at less than the imported price and as a result suffer huge losses.
It was noted at the meeting that under-recoveries of oil marketing companies on account of current price structure and burden faced the government by way of compensating the companies during the period 2003-04 to 2009-10 was in excess of Rs 3.45 lakh crore. The possible inflationary impact of rise in the prices of petroleum products was also discussed.
Diesel, which is currently sold at a discount of Rs 3.49 a litre, is the nation's most consumed fuel that is used in transport sector and hence has inflationary impact. Petrol in Delhi currently costs Rs 47.93 a litre, while diesel is priced at Rs 38.10 a litre.
State-owned Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum currently lose Rs 203 crore (Rs 2.03 billion) per day on selling fuel below imported cost. The eGoM will be meet again soon, but no dates were given for the next meeting.
