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| Govt decontrols fuel prices | | | Agencies
New Delhi, June 25: In a major policy reform that will help the government improve its financial health but may stoke inflation, a ministerial panel Friday decided to decontrol petrol, and increase prices of diesel, kerosene and cooking gas.
The empowered group of ministers (EGoM) headed by Finance Minister Pranab Mukherjee also decided to eventually free up diesel prices from administrative control, Petroleum Secretary S. Sundareshan told reporters here after the EGoM meeting.
The deregulation will lead to an increase of 3.73 per litre in prices of petrol from Friday midnight. The government has also hiked the prices of diesel by Rs.2 a litre, kerosene by Rs.3 a litre and cooking gas by Rs.35 per cylinder.
State-run oil marketing companies, which now sell fuel products at state-set prices, will gain, as investors showed Friday by cheering on their shares.
Indian Oil closed 10.4 percent higher at Rs 377.30 and ONGC gained 6.4 percent to 1,254 in a market down 1 percent.
Indian Oil, Bharat Petroleum and Hindustan Petroleum suffer revenue losses as they sell auto and cooking fuels at state-set discounted prices to help the government control inflation.
The companies are compensated partly by the government through cash and partly by state-run explorers through discounts on crude oil and products. But they have to bear some of the losses themselves.
"Even after all these changes, underrecoveries for this fiscal year for the [state-run] marketing companies will be Rs 53,000 crore," Sundareshan said.
Despite the deregulation, the government is retaining the right to intervene if global crude prices spike, he added.
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