Petroleum minister Ram Naik told The Financial Express that the primary reason for the increase in the oil import bill was sharp increase in international crude prices coupled with weakening of rupee against dollar.

Mr Naik said that a decision on hiking price of petro products would be taken only after the OPEC meeting, scheduled in the first week of September and return of Prime Minister Atal Behari Vajpayee from his US trip.

Senior petroleum ministry officials, however, said that a correction in the petroleum product prices was overdue and the prices of diesel, LPG, petrol and kerosene will have to be revised as the finance ministry is reluctant to part with its revenue collections on account of increase in international crude prices or to even agree to the reduction in customs duty, as suggested by the nodal ministry.

"It is just a matter of time as to when the government takes a decision to announce the hike in petroleum product prices, which is overdue now", a senior ministry official said.

Officials said that the government can postpone its decision to announce this hike, but cannot avoid doing it. For instance, a correction in the diesel prices is overdue now. Diesel is being supplied with a subsidy of Rs three a litre, although the government had decided in 1997 to accord import parity price for domestic sales.

Last year's hike in diesel prices was announced when the international diesel prices were hovering around $ 162 per mt. Currently, the international diesel prices have touched a high of $ 308 per mt, but domestic diesel prices continue to be the same as last year.

Moreover, the oil pool deficit is currently hovering at around Rs 8500 crore, and is growing at a rate of Rs 500 crore a month on account of high international oil prices. It is feared that owing to the recent increase in international crude prices and the unchanged domestic prices scenario, the oil pool deficit may cross the Rs 15,000 crore mark by the end of this fiscal, officials added.

Commenting on the minister's statement that oil import bill will touch Rs 70,000 crore this year, petroleum ministry officials said that in order to meet the total domestic demand of 110 million tonnes, it is expected that around about 78 million tonnes of crude and over 2.5 million tonnes of petroleum products will be imported during the current fiscal.

Earlier, as per the oil economy budget prepared by the oil coordination committee, the crude import was anticipated at $ 24 a barrel with an exchange rate of Rs 44 to a dollar. However, this situation has changed now in the wake of firming up of international crude prices, which crossed $ 32 a barrel mark last week, besides the rupee sliding to Rs 46 a dollar.

In addition, the government is incurring a subsidy of 50-60 paisa per litre on sale of Aviation Turbine Fuel (ATF) while on LPG, the subsidy has gone up to Rs 143 per cylinder from Rs 125 per cylinder due to rise in crude oil prices.

Oil ministry SOS to MoF
Petroleum Minister Ram Naik has asked finance minister Yashwant Sinha to part with surplus tax revenue of Rs 12,000 crore likely to be collected on account of firming up of international oil prices to avert any increase in domestic prices of petrol products.

In a communication to Sinha, Naik is believed to have pointed out that government would collect about Rs 37,000 crore as excise and import duty as against the budgeted estimates of about Rs 25,000 crore in the wake of firming up of international crude prices, which crossed 32 dollar a barrel mark last week.