As per the law, an Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee, decides on revising rates of the sensitive products. However, no revision was done since June last year, despite the oil prices spiraled upwards by about 50 per cent.
Therefore, this made Reddy to get anxious on hiking the price as soon as possible. As a result, Reddy also went ahead in discussing the Rs 450 crore per day loss faced by the oil firm while selling diesel, domestic LPG and kerosene at government-controlled prices, with the Prime Minister.
Prior to this, Reddy has already conducted a meeting with Finance Minister, Pranab Mukherjee, inorder to push the issue to price hike ahead. He then said, "I am concerned about the increasing under-recoveries (revenue losses) of oil marketing companies (OMCs). Every day, OMCs are incurring under-recoveries of about Rs 450 crore." As per the sources, Reddy has proposed for a hike of Rs 3-4 litre in case of oil, whereas an increase up to Rs 20-25 per cylinder in LPG rates.
Reddy further claims that, currently, Oil companies are losing Rs 14.22 on the sale of every litre of diesel at the current price of Rs 37.75 per litre in Delhi, whereas, losses in kerosene and domestic LPG cylinder per 14.2 kg are recorded to be Rs 27.47 per litre and Rs 381.14 per 14.2-kg respectively. The rates of these products saw the last hike in June 2010 when the crude was ruling at USD 72 per barrel. However, currently, the crude is bought at an average of $110 a barrel by India, whereas, the prices of the oil, kerosene and diesel remain at the same price.
View: The government must increase the price and let the market decide the price. Although it will hurt all of us in the short term but there will be two major gains in the long-run. It will help reduce the deficit that is being burnt, the second thing that we will achieve is innovation. The only way we can reduce the consumption of crude and gas is by being innovative in our approach. it will also give impetus to research for renewable sources of energy and make the current products more efficient.