Not content with the June 5 increase in retail prices of consumer fuels, the petroleum ministry has pitched for another hike along with a lowering of taxes and duties to provide relief to the cash-strapped state-run oil marketing companies.

In a note to the High-Powered Committee appointed to examine the finances of OMCs, it has said that continued losses by them in selling products below the required price level would restrict their operations and stop supplies to the consumers.

“Continued cash losses make operations unviable, sapping their ability to generate internal resources for proposed investments and to service consumers, including the vulnerable sections of the society and those in far-flung areas. Eventually, the consumers and the economy may be faced with a larger price shock and adjustment than what was originally attempted to be avoided,” it says.

Taking stock of the ruling international prices until the first fortnight of this month, it said that the required price increase per litre in petrol was Rs 14.92, in diesel Rs 24.90 and in kerosene Rs 38.09. As for an LPG cylinder, the price increase needed was Rs 338.53.

On June 5, the government abolished customs duty on crude oil and lowered that on petrol and diesel by 5 percent while lowering excise duty on both products by Re 1 a litre. It also raised petrol prices by Rs 5 a litre, diesel by Rs 3 a litre and cooking gas by Rs 50 a cylinder.

However, these measures have eroded the gains that were expected due to sustained crude rally internationally, touching $146 a barrel at one time. Though the prices have started retreating since last week, the ministry's estimate (prior to the downtrend) is that the OMCs would lose Rs 215,000 crore until end March 2009.

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