"The Petroleum Ministry has conveyed to oil marketing companies to raise kerosene price by 25 paise every month till April 2017," a senior official said. The first increase has been notified by the oil companies but the rates have so far no reflected in the price of kerosene sold through public distribution system (PDS). It will happen after state governments concur.
Before the price hike, kerosene cost Rs 14.96 a litre in Delhi. Its price was last raised by Rs 2.64 a litre in June 2011. The previous increase happened in June 2010, when prices went up by Rs 3.23 a litre. Officials said PDS kerosene price of Rs 14.96 a litre was at Rs 13.12 discount to the fuel's actual cost of production. Of the discount, the government bears Rs 12 a litre and the rest of the bill is footed by upstream oil producers like ONGC. Kerosene accounted for 41.7 per cent of the total petroleum subsidy of Rs 27,571 crore in 2015-16.
The previous UPA government had taken a similar approach of raising rates in small dosage of 50 paise a litre per month to completely eliminate subsidy on diesel. This approached helped the present BJP-led government to deregulate diesel price in October 2014.
Petrol price was deregulated in June 2010. As per Icra estimates, the move to increase retail prices of subsidised kerosene by Rs 0.25 a litre per month for 10 months (from July 2016 to April 2017) would lead to overall reduction in gross under-recovery or subsidy by Rs 760 crore in current fiscal and Rs 2,040 crore in FY18.
"As kerosene under-recoveries beyond Rs 12/litre are expected to be borne by PSU upstream companies, the upstream companies would be major beneficiaries of the reform, especially at current or higher level of crude oil prices," it said.
Subsidy on kerosene was expected to be in the range of Rs 9,000-12,500 crore in 2016-17, assuming crude oil price of USD 40-50 per barrel.
In a report, Bank of America-Merrill Lynch said, "This is a significant pricing reform, long in waiting, and a positive surprise to the markets given the stiff opposition in the past. Post the price increase, overall FY17/FY18 subsidies will fall by Rs 1,100 crore and Rs 2,400 crore, respectively."
Icra said the increased retail prices of subsidised kerosene along with implementation of planned pilot scheme to provide subsidy directly in the bank account of users (Direct Benefit Transfer for Kerosene or DBTK) may also lead to lower diversion of kerosene for unintended purposes.
The DBTK, on a pilot basis in 26 districts, is aimed at reducing the leakage of kerosene, which is widely used for adulteration of auto-fuels (especially diesel). This is because of material price differential between diesel and kerosene rates.
While subsidised kerosene costs Rs 14.96 a litre in Delhi, diesel is priced at Rs 54.70. Non-subsidised kerosene costs Rs 52.82 a litre, which is close to the diesel price.
Pradhan to attend small oil fields road show in Houston today
India will promote bidding of 67 discovered small oil fields in two international roadshows here which will be attended by Minister of State for Petroleum and Natural Gas Dharmendra Pradhan. Pradhan will pay an official visit to Houston, known for its oil and gas industries, and Washington between July 13 and 18, during which he will launch the international road show for the 67 DSF in Houston. "The two-day road show in Houston from July 14 will be held to promote the 67 Discovered Small Fields (DSF) Bid Round 2016," said a Petroleum Ministry source here. Pradhan will also hold meetings with various think-tanks working in the hydrocarbon sector both, in Houston and Washington. He will also visit technology centres working in oil and gas spheres, the petroleum ministry said in a statement. Pradhan will be accompanied by Petroleum and Natural Gas Secretary K D Tripathi, senior officers and chairman and managing directors of leading Oil companies ONGC, IOCL, GAIL, HPCL and MD-BPRL.
During the Interactive meet scheduled to take place on July 14 and 15, the delegation of senior government officials and leaders of Indian oil & gas companies, led by Pradhan will interact with CEO's of US-based E&P companies, group of Indian scientists from the field of hydrocarbon research, members of US India Business Council (USIBC) and group of investors. Pradhan also inaugurated the 'Data Centre' in Houston on July 13 which can be accessed by all interested investors to view the technical data related to the small fields being offered under the upcoming bid round.