Although the government compensates state-run oil companies for subsidising diesel alone, the losses are still working out to be over Rs. 10 on every litre of fuel sold.
In an interview to CNBC-TV18, BPCL's chairman and managing director, R.K Singh said he is pleased with the government's move to consider fuel price hike. "Since the hike will happen over a period of one year, it will help consumer adjust to the hike," he said.
Meanwhile state- rum oil marketing companies -- Indian Oil, Hindustan Petroleum and Bharat Petroleum ---- have projected huge under-recoveries on petrol, LPG and kerosene below the cost price at around Rs. 500 crore a day.
Below is the edited transcript of his interview to CNBC-TV18
Q: You must be heartened by the news that the cabinet is taking up the Kelkar Committee proposals. Where would you peg realistic expectations in terms of fuel price changes this week?
A: Yes, indeed we are happy about it. This will be good for the country, its economy and specially for oil companies. It is a proposal stage. I am not privy to any such decision but it is a proposal which has been mentioned in the various ministry meetings. If the increase that has been proposed is accepted by the cabinet it will take place in a phased manner. Diesel is around Rs 9-10 at the moment. To increase the price by Rs 9-10 will simply not be doable. It will create problem in the market.
So, we should increase it in a phased manner. It can be a rupee per month which will not be a shock to the consumer. Also the consumer will get adjusted to it. Over a period of 10 months or one year, the under-recovery on diesel which is largest component of the entire under-recovery will get eliminated and people will get adjusted to it. They will not feel the shock provided the crude prices and the rupee-dollar exchange rate will continue to be in the same range as it is today.
Q: Are you expecting the LPG cap to be raised as well and if it comes through will it be compensated by the cylinder prices being hiked?
A: It has to be compensated. It is a government decision to raise the cap from 6 to the number they are talking about. However, this has to be to an extent that under-recovery compensated by the government will have to go up.
Q: Do you see the possibility of any kind of tinkering in the price of kerosene however small this time?
A: That also is a part of the proposal. However, that increase will be very nominal because kerosene is the fuel used by the poor man. So, I can't give a definite answer as to what will be the increase. The proposal is to increase the price of diesel and kerosene in a phased manner but the government will have to take a call on this.
Q: Any interactions with the government on when these price hikes may come through, can it be as soon as this week itself?
A: No, I have no idea about it.
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