NEW DELHI, May 6: Prime Minister Inder Kumar Gujral, who is also the minister for petroleum, is likely to put his signature to a draft cabinet note on oil price hike by the week-end.

A cabinet note, recommending a roughly 15 per cent increase in the prices of petroleum products, is being drafted in utter haste to enable the Centre to announce a hike by the month-end. The file on the proposal, which modifies the petroleum ministry's initial plan of a 30 per cent hike in oil prices, is already in circulation.

The prime minister's meeting with his minister of state for petroleum and natural gas TR Baalu was originally scheduled for Monday. Gujral is likely to consult the petroleum ministry brass before he faces United Front leaders and a host of state chief ministers on Saturday.

Gujral will probably sound out Front leaders and the Left about the proposed hike before placing the proposal before the cabinet, sources said. The left parties are against a hike in petroleum prices.

Baalu, who would have preferred to stall the administered price revision for a few months, is now reconciled to the hike now that hopes of a duty roll-back on petroleum products has receded, sources said. Baalu was banking on a 10 per cent customs and excise duty reduction that could somewhat ease the plight of oil companies.

Though the petroleum ministry has not received any formal communication from the North Block, it has received ample indications that the ministry of finance was not in favour of rolling back duties. The duty concession would have made the national oil companies richer by at least Rs 5,000 crore.

National oil companies like Indian Oil Corporation (IOC), Hindustan Petroleum and Bharat Petroleum are yet to recover more than Rs 16,000 crore from the oil pool account. Some of that money will be required in the coming few months to pay for crude oil and petroleum products imports.

The petrol price hike, said sources, would not even attempt to wipe out the entire deficit, that is growing by Rs 820 crore a year. It would merely be an exercise to meet IOC's immediate funds crunch, which is the canalising agency for crude oil imports.

IOC's dues from the oil pool account, which balances surcharges on some petroleum products with subsidies on others, is roughly Rs 9,000 crore. A 15 per cent hike in most petroleum products would help the centre recover roughly the amount, helping IOC pay for crude and petroleum oil imports (POL) imports for the financial year.

It is not clear now whether the axe will fall on petroleum products like kerosene, liquefied petroleum gas (LPG), diesel and naphtha used as a fertiliser, that enjoy more than Rs 18,440 crore subsidy.

, or on already over-priced products like petrol and aviation turbine fuel (ATF).

The Centre enhanced IOC's external commercial borrowing limit to $2.5 billion earlier this year from $1.9 billion to enable it to pay for imports of crude oil and POL. The corporation has plans of raising a syndicated loan of $1 billion, which would meet roughly a fifth of its foreign exchange requirements for the current fiscal and pay for crude and POL imports till June.

The more than 10 per cent increase in POL consumption last year, pushed up the country's oil import bill to $8.7 billion (Rs 31,075 crore) during the first 11 months of the 1996-97 fiscal.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.