OMCs to lose Rs 31,000 cr on fuel subsidy in FY-10

After putting the hike in fuel prices on hold, Oil Minister Murli Deora on Thursday wrote an emergency letter to Finance Minister Pranab Mukherjee stating that the Oil Marketing Companies (OMCs) will lose Rs 31,000 cr this financial year. Deora stated that OMCs are losing Rs 150 cr per day on fuel subsidy. Confronted with resistance from allies, the Congress on Wednesday advised the government to put the proposal to hike prices of petro products on hold. The Congress core committee, which discussed the Kirit Parikh panel recommendations, directed the government to approach the allies again with a “politically permissible” revision in prices. “The core committee was of the view that the prices of petro-goods should not be hiked immediately. We need to hold more consultations with allies on the Parikh panel recommendations that looked into fuel pricing,” said a senior leader. Government leaders said the panel’s recommendations will not meet the fate of earlier committees on the subject. Sources said finance minister Pranab Mukherjee will be meeting oil minister Murli Deora on Thursday to discuss what could be the “politically feasible” quantum of hikes. Prime Minister Manmohan Singh has been maintaining that the government cannot dig the hole any deeper on the issue of abandoning petroleum price controls. He has been telling his party leaders that something needed to be done immediately to fix the economy soaked in oil subsidy. But that the mood in the Congress was not in favour of any drastic hike in fuel prices was evident this evening itself when party spokesman Abhishek Manu Singhvi said the government should take such a step only if it’s completely unavoidable. “It should be demonstrably necessary. Even if it’s unavoidable, it should be kept at real minimum,” Mr Singhvi said. The prime minister’s eleventh-hour intervention also failed to get the allies on board. Mr Singh, who spoke to Mamata Banerjee this morning, was told by the Trinamool Congress chief that her party was not comfortable with the idea. Ms Banerjee also told the prime minister that she would skip the Thursday’s Cabinet meeting that was scheduled to take up the petroleum pricing issue. Ms Mamata amplified her opposition to the move by convening a meeting of her party’s core committee to discuss the matter. Sources said she was all set to use the forum to drive home the point that the government and the Trinamool Congress was not on the same page on petroleum pricing. Mr Deora, who consulted the DMK, the other dissenting ally, , too failed to enlist the southern partner’s support. Telecom minister A Raja conveyed to the petroleum minister that his party was against a hike in prices as it could raise transpiration costs and push up the prices of essentials commodities further. Sensing that the decision to sit on the Parikh panel recommendations is a bad advertisement for the regime, government leaders said the prime minister will not delay a decision. “A revision that gets the government halfway ther, or even one-tenth of the way, or one-twentieth, will signal a commitment to tackling the subsidy issue,” said a government leader.