Sanjay Dutta/TNN
New Delhi, Oct 30: After Diwali, the government looks poised to stage a populist bang. Top government and ruling coalition sources told TOI on Wednesday the oil ministry is looking at bringing down the price of cooking gas refills following a signal from oil minister Murli Deora. And, the move could well be a precursor to a reduction in motor fuel prices just before the elections.
The sources said Deora, more sensitive to Congress' political calculus after indications of a February LS polls, is juggling whether the June hike in cooking gas price can be rolled back completely or partially. A reduction at this point will push up oil marketing firms' losses on this fuel only marginally but could yield dividend for the ruling coalition at the hustings.
What is of greater importance is that the move denotes a shift in the government's priorities from oil companies' bottomlines to ballot boxes, raising the prospect of a cut in motor fuel prices closer to the polls.
Though the easing of international crude prices has considerably ligntened up the oil companies' burden, the ministry would not brook the suggestion of a price-cut, citing accumulated losses and depreciated rupee. With the gas price cut coming on the table, the resistance seems to be softening.
This shift in priorities was evident when a senior ministry official told reporters while ruling out any formal move to cut fuel prices, "I do not see a trigger, unless political, for a reduction in fuel prices".
On his part, Deora declined to confirm or deny the move. "In line with the UPA's pro-poor philosophy, despite huge losses of government oil companies I have not raised kerosene prices to ensure fuel for the poorest of the poor. Cooking gas now fuels kitchens for 10.5 crore families and directly concerns the convenience of our mothers and sisters. Last week, I had told Parliament that fuel retail prices may be lowered if the economics work out. I stand by that...the oil companies are still losing money," he told TOI.
Indeed, crude's continuous fall, down over 60% from the mid-July peak, have raised popular expectations of some relief in fuel prices. But The dollar's appreciation to Rs 50 has meant that at present retail prices, the companies will break even at $57/barrel crude price against $67 when each Greenback was at Rs 41. Technically speaking, crude has to sutain a level below this for at least a month or so before retail prices can be reduced.
The government had raised cooking gas price by Rs 50 on June 4 to pare some of the Rs 353 loss that the state-run retailers were losing on each refill at that time, while they are losing Rs 333 now. Prices of motor fuels were also raised as the companies saw losses mount.