New Delhi, February 3
A Prime Minister-appointed expert group today suggested freeing petrol and diesel prices and called for raising LPG rates by Rs 100 per cylinder and kerosene by Rs 6 a litre. However, the government, which is battling high inflation, made an attempt to play down the suggestions of the panel.

Petroluem Minister Murli Deora, who received the report from panel head Kirit Parikh here, said the government will not take any decision in haste.

The assurance from the Petroleum Minister comes within days of his saying that he would be meeting Finance Minister Pranab Mukherjee to seek compensation for the oil companies suffering losses due to fuel subsidy.

At current global crude oil prices, deregulating auto fuel pricing would result in a hike of Rs 4.72 a litre in petrol prices and a rise of Rs 2.33 per litre in diesel rates.

The cascading effect that an increase in diesel rates would have on food prices may force the government to not accept the recommendations even as there seems to be a consensus between ministries of finance and petroleum on freeing petrol prices.

“Current petroleum product pricing policy of the government is not sustainable,” said Parikh. The other members of the panel include Finance Secretary Ashok Chawala and Oil Secretary S Sundareshan.

At present, kerosene is sold at a discounted rate of Rs 18.06 a litre and domestic LPG cylinder at Rs 287.59. The gap between retail price (after the suggested increase) and the imported cost of fuel should be met by the government and by upstream firms, ONGC and Oil India, suggested the panel.

The Petroleum Minister had earlier said he would seek compensation for companies suffering losses due to fuel subsidy and that there was no provision for hike in fuel prices due to inflation. “We are trying not to increase the auto fuel prices,” Deora had said. “You know the government is very worried about the price rise. If hypothetically, there was an increase in diesel of Rs 2, then it will have a cascading effect on commodities,” the minister had said.

Deora has sought the help of the Finance Ministry to deal with the shortfall that the oil marketing companies are facing due to the subsidised retail prices of petrol, diesel, kerosene and cooking gas.

The estimated under-recoveries in the last three quarters is Rs 29,000 crore, out of which upstream companies, ONGC and Oil India Ltd, have contributed Rs.8,000 crore towards losses from petrol and diesel. The government has so far promised only Rs 12,000 crore as cash for under-recoveries from kerosene and LPG, but this leaves a shortfall of Rs 9,000 crore for the period April to December 2009.

The total estimated under-recoveries for this fiscal would be at Rs 43,000 crore, at a global oil price of $73 per barrel.