Click to play videoNew Delhi: If you thought falling crude prices would mean a cut in fuel prices, there is no such luck.
Prime Minister Manmohan Singh on Tuesday made it clear that with oil companies still in the red, the time is not right to slash prices.
Crude is now trading at $ 60 dollars, down from a high of $148 a few months ago.
The Indian mix of crude basket costs around $56 — a rate at which oil companies are making a profit of over Rs 4 on a litre of petrol and losing just 96 paise on diesel.
But they have toted up losses of Rs 14,000 crore over the past six months alone, which explains Singh’s hesitation.
“I am not in favour of cutting oil prices. There has been a huge loss. The financial health of the oil companies has to be strong to supply fuel on a long-term basis and create a strong infrastructure. After sometime we can consider this if this position continues,” Singh said.
But the Prime Minister's Chief Economic Advisor Arvind Virmani feels that it is the best time to free up prices, because oil may not stay low for long.
“t is an opportunity because we are prepared. It would not be proper to assume that oil prices will remain low forever,” Virmani said.
The economic logic is compelling, but market-based pricing might still have to await a new government.
If anything, despite the Prime Minister's assertion a cut in petrol and diesel prices before announcement of elections is a distinct possibility.
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