The Narendra Modi government is in a quandary on petrol and diesel price hike, people in the know of the matter told CNBC-TV18, adding that a policy call is likely on the way forward.
Government sources said there is no easy choice on petrol and diesel prices. Fuel prices will not rise to international levels, but oil marketing companies (OMCs) need to be viable, sources said.
Sources said it is required to choose what is least disruptive for consumers and the economy. Under recovery on diesel, broadly seen as Rs 25-30 per litre, while pass-through on diesel is more challenging.
There has been a huge jump in international prices of diesel due to a worldwide shortage. Under recover on petrol, is broadly seen at Rs 8-10 per litre, sources said.
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The government sources said that rising inflation and sheltering the poor were concerns, and there was no intention of shocking the system. People need time and space to adjust to higher prices, the sources added.
A government official said OMCs loss on petrol has increased to Rs 10 and Rs 25 on diesel. The current pause on price revision is not sustainable and OMCs should be viable.
The official was not sure when the price revision would be resumed and said the government is in a tough situation. The official said petrol and diesel price hike will further fuel inflation while halting the retail prices revision was costing the OMCs. "A balanced approach needs to be taken soon," the official said.
Sources said diesel in the domestic market is being sold by public sector undertakings (PSUs) as private retailers are shying away from diesel sales due to losses, "Worldwide, there is a huge spike in diesel demand as most of it is being imported by Europe. Even Saudi is also importing diesel," sources added.