Fuel prices must be rationalised, says PM

The Prime Minister, Dr Manmohan Singh, acknowledged that there is a need to rationalise fuel prices. But, at the same time it has to be ensured that the poor is shielded from the effect of such a rationalisation, he said.

Whether this statement of the soft-spoken Prime Minister, who spoke in his mother tongue – Punjabi – is any indication of a possible price increase after the ongoing Budget session only time will tell. Any change in fuel pricing is a political issue.

Dr Singh was speaking after dedicating the $4-billion Guru Gobind Singh Refinery at Phulkori, Bhatinda, to the nation here on Saturday.

“The challenges we face on the energy front are formidable. We need adequate supplies of energy at affordable prices. Domestic sources of crude oil and gas are inadequate to meet the growing demands of our rapidly expanding economy,” he added.

The Prime Minister said that with imports accounting for about 80 per cent of crude oil supplies, the spiralling prices of crude oil in the international market have put a severe strain on the import bill. To insulate the common man from the impact of rising oil prices, the Government shoulders a sizeable portion of the burden by pricing diesel, kerosene and domestic below their market price, he said.

Though petrol has been deregulated in June 2010, an artificial Government control continues.

“We need to take steps to conserve our scarce energy source resources. There is no room for inefficient and wasteful usage of fuel, be it petrol, diesel, kerosene, or gas,” he said.

The last petrol price revision was effected on December 1, 2011, when the oil companies reduced the price by Rs 0.65 per litre on top of an earlier price reduction of Rs 1.85 per litre effected on November 16, 2011. These two price reductions were effected as a result of calming down of the international petrol prices which fell from $120.83 per barrel to $115.03 per barrel and further to $ 109.03 per barrel in the relevant pricing periods.

Today, the oil companies are selling petrol almost at Rs 8 a litre below market price, diesel at Rs 15 a litre, kerosene at Rs 32 a litre and domestic LPG Rs 550 a cylinder. In fact, the oil companies have been saying that continuation of such pricing will only impede their ability to import crude oil and may affect product supply-demand balance.

In his speech, the Petroleum Minister, Mr S. Jaipal Reddy, said that India is becoming a refinery hub with the country’s refining capacity having grown from a meager 0.25 million tonne per annum at the time of independence to 213 million tonne per annum today. However, with the growing population, India’s energy needs are increasing at a rapid rate. The country’s oil import bill has already breached the $100 billion mark in 2010-11.