The oil companies have increased the quota of LPG cylinders for the six months from September 14, 2012 to March 2013 to a total of 5 cylinders, responding to the government decision today. They have also decided to increase the price of diesel by about 65 paise from the night of January 17 and by about Rs 15-17 (including tax) for bulk consumers such as factories, offices and mobile towers who take diesel directly from the companies.
Petrol price will be lowered by about 35 paise.
The government had, earlier in the day, raised the total number of subsidized LPG cylinders allowed per family from 6 to 9 per year.
Consumers will be allowed a total of 9 subsidized cylinders per year starting from April this year, Indian Oil Corporation said. “No refund shall be admissible on any LPG domestic cylinder already supplied at non subsidized price during the period,” IOC said.
Non-subsidized LPG cylinders, which currently cost in the range of Rs 900, will cost about Rs 950 from now on, IOC added. “The decrease in the under-recoveries on account of increase in price of domestic non-subsidized LPG is estimated to be insignificant as the no. of subsided cylinders has been increased to five till March 2013,” the company said.
The price revisions are applicable to Bharat Petroleum and Hindustan Petroleum as well.
“For bulk consumers of HSD taking supplies directly from the installations of the OMCs, henceforth, no subsidy shall be available and the price shall be non-subsidized market determined price. Accordingly, the price of diesel for bulk consumers taking supplies directly from installations of IndianOil shall stand increased by Rs.9.25 per litre (excluding VAT) w.e.f. midnight of 17-18, January, 2013,” it said.
It is not clear how the companies are going to prevent bulk consumers from buying cheaper diesel from their retail outlets. Dual price mechanisms have usually been accompanied by a ‘black market’ where petrol pump owners divert subsidized oil meant for citizens to bulk buyers.
Indian oil said that it expects the measures to lower its selling losses on diesel by Rs.3400 crore till March 2013.
“Based on the current prices and volumes, the decrease in the under-recoveries on annual basis on HSD shall be approx. Rs.15000 crore for OMCs as a whole,” it said.
The increase in under-recovery on account of increase in subsidized LPG cylinder shall be Rs.5200 crore for OMCs as a whole till March 2013. Based on account of volume and price, the increase in under-recoveries on account of LPG cylinder on annual basis shall be Rs.10000 crore for OMCs as a whole, Indian Oil said.
Only the three government-owned companies sell subsidized petroleum products, and all others sell petroleum products at market rates.