NEW DELHI (AFP) — India's petroleum ministry on Friday said a domestic fuel price hike was "inevitable" to bail out state oil firms that sell fuel at hugely discounted rates and are reeling from surging global prices.
A "price hike is inevitable," Petroleum Secretary M.S. Srinivasan said, but added the "specific quantity of the price increase" was still being worked out.
The Press Trust of India reported without naming sources that the petroleum ministry was seeking a 10-rupee-a-litre increase in petrol prices and a five-rupee-a-litre hike in diesel prices.
Based on current pump prices in New Delhi, this would represent a 22 percent increase for petrol and 16 percent on diesel.
"The situation is getting to be alarming. We need to stem the rot in the beginning," Srinivasan told reporters after meeting the heads of public sector oil firms which are posting huge losses from selling heavily discounted fuel.
State-owned refiners have been reporting combined revenue losses of 105 million dollars a day as international prices have surged.
The government sets the massively discounted prices at which fuels are sold to shield the country's poverty-hit masses from high fuel costs and to help contain inflation.
The petroleum ministry's comments came after oil prices cooled slightly on Friday, a day after rocketing to all-time highs of more than 135 dollars a barrel, but analysts said the pullback was only a breather as strong global energy demand continues to stretch tight supplies.
"We expect a decision (on prices) in three-to-four days time," Srinivasan said.
The ministry was proposing a combination of price hikes and duty cuts to reduce the revenue shortfalls suffered by state-owned refiners from sales of petrol, diesel, liquid petroleum gas and kerosene, he added.
Petroleum Minister Murli Deora said he had reviewed the situation with the Prime Minister Manmohan Singh late on Thursday.
"We're trying to see that some action is taken immediately," Deora said.
But the Congress-led government which faces general elections within a year, is fearful any fuel rise could trigger a backlash from voters already reeling from high overall inflation running at 7.82 percent, far above the central bank's target of 5.5 percent.
In February, India hiked gasoline and diesel prices for the first time in 20 months.
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