NEW DELHI Fuel retailers have threatened to hike petrol prices by about 15 percent if the government does not temporarily regulate prices and compensate them for losses on sales, further evidence the liberalised market really remains under New Delhi's control.
The Reserve Bank of India (RBI) in its policy review on Tuesday also advocated raising gasoline retail prices.
"It is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true costs of production," RBI Governor Duvvuri Subbarao said.
India freed pricing of gasoline in June 2010 but continues to subsidise prices of gasoil, kerosene and cooking gas to protect the poor from the impact of any inflation pressures.
In the second half of 2011, oil companies began reflecting market realit ies more closely and raised local gasoline prices but they stopped from end-November on the request of the government -- their majority shareholder -- ahead of elections in some states. Petrol prices were last revised on Dec 1.
State-refiners -- Indian Oil Corp (IOC.NS), Bharat Petroleum (BPCL.NS) and Hindustan Petroleum (HPCL.NS) -- have suffered revenue losses of 22.87 billion rupees because they haven't changed gasoline prices from December 16 to March 31.
In the first fortnight of this fiscal year beginning April 1, the revenue loss on retail sales of gasoline was 7.45 billion rupees, IOC, the country's biggest fuel retailer said in a statement on Tuesday.
IOC said state-run refiners cannot sustain the current scenario where they import crude oil at $121.29 per barrel and sell at $109.03 per barrel.
"Continuation of such pricing will only impede the ability of the Company to import crude oil and may affect product supply-demand balance," it said, adding the alternative was to "increase the price of petrol by Rs.8.04 per litre (excluding State levies) with immediate effect."
The refiners have urged the government to lower factory gate tax on gasoline from 14.78 rupees a litre by an amount equivalent to the revenue loss on retail sales and asked state governments to cut local levies, varying from 15 to 33 percent.
IOC is also seeking an increase in prices of the three fuel sold at subsidised rates as in 2012/13 the combined revenue losses of refiners on such sales could surge to 2.04 trillion rupees from 1.39 trillion rupees a year ago, against which full compensation is yet to be received.
(Reporting by Nidhi Verma; Editing by Jo Winterbottom)